Organisations Still Coming Up Short in Fraud Prevention, Finds ACFE Report

 
Organisations around the world lose an estimated 5% of their annual revenues to occupational fraud, according to a survey of Certified Fraud Examiners (CFEs) who investigated cases between January 2012 and December 2013. Applied to the estimated 2013 Gross World Product, this figure translates to a potential total fraud loss of more than US$3.5 trillion.

The Association of Certified Fraud Examiners (ACFE) published the results of the survey in its 2014 Report to the Nations on Occupational Fraud and Abuse, which includes data compiled from 1,483 cases of fraud submitted by CFEs globally.

Other key findings from the 80-page report include:

  • Fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the study was US$145,000. Some 24% of these cases caused losses of at least US$1m.
  • Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.
  • Tips are key in detecting fraud. Occupational fraud is far more likely to be detected by a tip than by any other method. More than 40% of all cases were detected by a tip – with the majority of them coming from employees of the victim organisation.
  • Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.
  • High-level perpetrators do the most damage. The median loss among frauds committed by owner/executives was US$500,000, considerably higher than the median loss of US$130,000 for frauds committed by managers and US$75,000 for frauds committed by other employees.
  • Small businesses face increased risk. The smallest organisations in the study suffered disproportionally, with a median loss of US$154,000 – higher than the overall median loss for fraud cases in the study (US$145,000). These organisations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.

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