Organisations around the world lose an estimated 5 percent of their annual revenues to fraud, according to a survey of Certified Fraud Examiners (CFEs) who investigated cases between January 2010 and December 2011.
Applied to the estimated 2011 Gross World Product, this figure translates to a potential total fraud loss of more than $3.5 trillion. The Association of Certified Fraud Examiners (ACFE) published the results of the survey in its highly-anticipated 2012 Report to the Nations on Occupational Fraud & Abuse. The report includes global data amongst the 1,388 cases of fraud that were studied.
According to ACFE president & CEO James D. Ratley, CFE, the latest findings continue to validate statistical trends from previous reports.
“As in previous years, what is perhaps most striking about the data we gathered is how consistent the patterns of fraud are around the globe and over time,” Ratley writes in the introduction to the report. “We believe this consistency reaffirms the value of our research efforts and the reliability of our findings as truly representative of the characteristics of occupational fraudsters and their schemes.”
Key findings from the 76-page report include that fraud schemes are extremely costly. “The median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of these cases caused losses of at least $1 million.” 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. Also, tips are key in detecting fraud. 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,” the report stated.
It also disclosed that 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 $573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000. Small businesses face increased risk. The smallest organisations in the study suffered the largest median losses. These organisations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud. The Report to the Nations also details findings such as how organisations were affected based on the particular sector of industry, how the implementation of anti-fraud controls affected exposure to fraud, the breakdown of fraud statistics by geographical region and the most common behavioural traits observed among fraud perpetrators,” the report stated.
Information from CFEs in 94 nations was compiled to develop the benchmarking statistics on occupational fraud losses, detection methods and perpetrators. Since its first edition in 1996, the biannual report has evolved and been modified to continue to draw more meaningful information from the experiences of CFEs and the frauds they encounter.
According to Andi McNeal, CFE, CPA, co-editor of the report and the ACFE’s director of research, the comparison to past statistics and the consistency of the data came into focus while compiling the 2012 Report.
“We delved deeper into year on year comparisons, and reached back a little bit further to examine trends over time even more than we have previously,” McNeal said. “We were really impressed by the picture that we saw come from that analysis. It was enough for us to stop and take note that we are seeing what we believe to be true trends in how fraud is perpetrated, and how organisations are victimised.’”