Occupational Fraud: Top Trends and How to Prevent It

  • Article

The Association of Certified Fraud Examiners (ACFE) has released its annual global study on occupational fraud: Report to the Nations 2020. In this report, the ACFE studied 2,504 cases between January 2018 and September 2019 from 125 countries, resulting in over $3.6 billion in lost revenue. With International Fraud Awareness Week upon us (Nov. 14-20, 2021), here are key takeaways from the report, as well as resources to help you prevent fraud from infiltrating your organization.

The Typical Fraud Case

The most common scheme (86% of cases) was asset misappropriation, in which an employee steals or misuses the organization’s resources (such as theft of company cash, false billing schemes or inflated expense reports). The average fraud case lasted 14 months before detection and the estimated amount of revenue lost per year was 5%.

Profile of the Average Fraudster

Of the 2,504 cases studied by the ACFE, here are the most common characteristics of an occupational fraudster:

  • Men committed 72% of all fraud, with a median loss of $150,000 (women’s median loss was $85,000).
  • Fraudsters aged 55 and over caused larger median losses than their younger counterparts - $425,000 compared to $75,000 of those under 40.
  • 64% of occupational fraudsters had a least a bachelor’s degree.
  • Fraudsters who had been with their organization for over six years were twice as likely to commit fraud.
  • Owners and executive-level staff only committed 20% of occupational fraud, but they accounted for the largest losses compared to employees ($600,000 vs. $60,000).
  • More than half of all occupational fraud arose from the operations, accounting, sales and executive-level departments.

Common Fraud Victims

The most popular industries for fraud schemes are banking and financial services, government and public administration, manufacturing, healthcare and energy. Since small business and nonprofit organizations have fewer anti-fraud controls, they are more susceptible to fraud than large businesses. Within small businesses, the odds of billing fraud and payroll fraud were two times higher, and check and payment tampering was four times higher.

Detecting Fraud

43% of schemes were detected by tips, with half of those tips coming from employees. 80% of fraudsters who were caught faced internal discipline from their victim organization, with 46% of these organizations failing to report cases to law enforcement because they considered internal discipline to be sufficient.

Preventing Occupational Fraud

Fraud is a long withstanding threat to businesses. So long as individuals have access to an organization’s assets, there will always be a risk of fraudulent behavior. As a result, organizations must take steps to safeguard themselves to prevent costly losses. Building strong internal controls, or procedures to avoid fraud and detect it, reduces the opportunity for fraudsters to succeed. Moreover, testing these controls frequently safeguards your business in between annual audits. Most importantly, if you’re concerned fraud is occurring within your organization, it’s imperative to ask for assistance. The certified fraud examiners in Doeren Mayhew’s Valuation and Litigation Support Group are here to help you understand your overall fraud risk and strengthen your internal controls – contact us today.

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