In today’s economy, companies cannot afford to lose money. According to the 2012 Report to the Nations from the ACFE, the typical organization loses 5% of its annual revenue to fraud. There are still a lot of organizations that think that fraud is something that won’t happen to them. Managers need to realize that fraud is real, and if it hasn’t happened in their organization yet, they still need to take action to prevent it from occurring in the future.
ACFE Global Fraud Report and Infographic
Fraud happens to businesses of all sizes, in all industries, in all countries. Some of the key findings from the report that were highlighted by the ACFE include:
- “The median loss caused by the occupational fraud cases in our study was $140,000. More than 1/5 of these cases caused losses of at least $1 million.
- The frauds reported to us lasted a median of 18 months before being detected.
- Occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.
- Occupational fraud is a significant threat to small businesses. The smallest organizations in our study suffered the largest median losses. These organizations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.
- The industries most commonly victimized in our current study were the banking and financial services, government and public administration, and manufacturing sectors.
- Perpetrators with higher levels of authority tend to cause much larger losses. The median loss among frauds committed by owner/executives was $573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000.
- In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct. Living beyond means (36% of cases), financial difficulties (27%), unusually close association with vendors or customers (19%) and excessive control issues (18%) were the most commonly observed behavioral warning signs.”
We decided to put a creative spin on some of the key findings from the ACFE’s report by preparing an infographic. To check out the infographic, click here.
5 Ways to Fight Fraud
Don’t wait for fraud to happen in your organization. Take action to prevent it now. We had the opportunity to interview ACFE President and CEO James Ratley upon the release of this year’s survey. Ratley shared five things that businesses can do now to combat workplace fraud:
- Understand fraud risks: Take steps to ensure that everyone in your organization understands that fraud is a major risk and knows where the organization is vulnerable to fraud.
- Address risks: Create and implement anti-fraud controls that address identified risks, and then make sure everyone in the organization follows them – this step should be ongoing, as your organization’s risks change over time.
- Employee education: Educate employees and managers about fraud so they know when and how to report suspicious behavior and the importance of doing so.
- Tone at the top and anti-fraud policies: Develop an anti-fraud policy/code of conduct that clearly indicates to employees the types of conduct that will not be tolerated. Train employees on the policy and consistently enforce it. Setting this kind of tone at the top makes a big difference.
- Have a fraud reporting tool: Have a system in place so that employees, vendors and customers can report fraud anonymously, so they won’t fear retaliation.
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About the Author
Lindsay Walker is the Corporate Journalist at Customer Expressions Corporation, developers of the i-Sight investigative case management software platform, an integrated and customizable solution for corporate investigations. She maintains the company blog at http://i-sight.com.
Lindsay Walker is the Corporate Journalist at Customer Expressions Corporation, developers of the i-Sight investigative case management software platform, an integrated and customizable solution for corporate investigations. She maintains the company blog at i-Sight.com.
