The 2018 Report to the Nations from the Association of Certified Fraud Examiners reported on world-wide occupational fraud data based on an analysis of 2,690 cases of occupational fraud between January 2016 and October 2017 based on information provided by the Certified Fraud Examiners who investigated those cases. Occupational fraud is defined as fraud committed against the organization by its own officers, directors, or employees.
The Report’s analysis of 2,690 cases of occupational fraud involved 125 countries in 23 industry categories. The total losses were in excess of $7 billion, with a median loss per case in the amount of $130,000. Twenty-two percent of the cases resulted in losses in excess of $1 million. The median duration of a fraud scheme was 16 months. The most common scheme in every global region was corruption.
The most common and least costly schemes involved asset misappropriation, with a medican loss of $114,000. The least common and most costly schemes involved financial statement fraud (10 percent of the cases), with a median loss of $800,000.
Small businesses (less than 100 employees) lost almost twice as much per scheme due to fraud ($200,000 median loss) than large businesses ($104,000 median loss). Internal control weaknesses were responsible for almost one-half of frauds.
The most common initial detection method was tips (40 percent versus 15 percent by internal audit and 13 percent by management review), with employees providing more than half of the tips.
Owners/executives represented only 19 percent of the occupational fraud cases but caused a median loss of $850,000. The losses caused by men were 75 percent larger than those caused by women. Those who had been with their company longer stole twice as much. Only 4 precent of those who committed fraud had a prior fraud conviction.
When fraudsters collude with each other, the median losses are far greater ($338,000 when three or more colluded; $150,00 when two colluded; $74,000 median loss for one fraudster). Eighty-five percent of fraudsters displayed at least one behavioral red flag of fraud.
The Report found that a majority of fraud victims recovered nothing.
The Report states: “Among the various kinds of fraud that organizations might be faced with, occupational fraud is likely the largest and most prevalent threat … There are millions of business and government organizations operating throughout the world and every one
of them, in some way, is vulnerable or potentially vulnerable to fraud committed by their employees. Most of those employees will never steal or abuse the trust that has been placed in them, but the ones who do can cause enormous damage.”
If your business may be the victim of occupational fraud (business fraud) in the United States, email us at firstname.lastname@example.org or telephone us toll-free in the United States at 800-756-2143 to find business litigation contingency lawyers who may handle your business fraud matter on a contingency basis.
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