The Association of Certified Fraud Examiners (ACFE) is the world’s largest anti-fraud organisation and premier provider of anti-fraud training and education. The ACFE regularly conducts a global fraud study with insightful findings which can help organisations with their fraud risk management.
This year, the ACFE’s 2018 Report to the Nations on Occupational Fraud and Abuse provided analysis of 2,690 cases of occupational fraud that were investigated by Certified Fraud Examiners, between January 2016 and October 2017. The fraud cases in the study came from 125 countries throughout the world, providing a truly global view into occupational fraud.
Among the various kinds of fraud that confront organisations, occupational fraud (a fraud committed against the organisation by its own officers, directors or employees) is likely the largest and most prevalent threat.
It constitutes an attack against the organisation from within, by the very people who were entrusted to protect its assets and resources.
The Primary categories of occupational fraud:
Of the three primary categories of occupational fraud, asset misappropriation is by far the most common, occurring in 89% of the cases in the study. However, they are also the least costly, causing a median loss of £90,000. Types of misappropriation include: theft, skimming, forgery, invoice fraud, payroll fraud, expense fraud and fund misuse.
Corruption schemes are the next most common form of occupational fraud; 38% of the cases in the study involved some form of corrupt act. These schemes resulted in a median loss of £200,000 to the victim organisations. Types of corruption include: conflict of interest, bribery, illegal gratuities, kickbacks and extortion.
Financial statement fraud
The least common, but most costly, form of occupational fraud is financial statement fraud, which occurred in 10% of the cases and caused a median loss of £620,000. Types of financial statement fraud include: fictitious reporting, concealments, overstatements, timing differences, improper asset valuations.
The ‘Red Flags’ of fraud
Understanding and recognising the behavioural red flags displayed by fraud perpetrators can help organisations detect fraud and mitigate losses. Living beyond means and financial difficulties have been the most common red flags in every ACFE study since 2008.
In 85% of the cases reported, fraudsters displayed at least one behavioural red flag and in 50% of cases, the fraudsters exhibited multiple red flags.
Neil Miller, our CEO, is a Certified Fraud Examiner and gives the following advice: “We have successfully provided clients suffering multi-million-pound frauds, corruption cases and intellectual property infringements with the evidence and intelligence required to win their cases and help recover their assets. Once a suspicion of fraud has arisen, don’t panic but act quickly. Seize the initiative by developing a course of action. Analyse the available evidence and circumstances surrounding the suspicion, retain accurate records, develop a fraud theory and set out your objectives in an investigation plan.”
Understanding and recognizing the behavioral red flags displayed by fraud perpetrators can help organizations detect fraud and mitigate losses.