Most managers, and in fact employees at all levels, assume their co-workers are honest and working to do their best for the organization. Unless they are the one who is perpetrating a fraud.

Unfortunately, occupational fraud is a lot more common than most people think. The Association of Certified Fraud Examiners (ACFE) has published a series of reports based on fraud examiners’ actual cases that document the pervasiveness of these hidden crimes. The 2014 edition of the Report to the Nations on Occupational Fraud and Abuse confirms that fraudsters steal 5% of top line revenue every year, which amounts to over $650 billion per year in the U.S. alone, and an astonishing $3.7 trillion worldwide. … Continue reading

This week is International Fraud Awareness Week, a global effort led by the Association of Certified Fraud Examiners (ACFE) to minimize the impact of fraud by promoting anti-fraud awareness and education.

We are proud to be among almost 1,000 organizations supporting this effort through the publication and distribution of educational materials that can help managers identify fraud risks and develop mitigation programs. This week we will feature fraud prevention-related content on our blog and we have issued a special edition of The Risk Mitigator. We are also proud to announce the release of our visual guide, 10 Fraud Facts. The guide highlights 10 facts about fraud from the ACFE’s 2014 report and offer tips to help your organization develop an effective fraud prevention program. Get your copy here.

Awareness of the potential for organizational fraud is the first step toward prevention. Yet a surprising number of organizations have no systematic fraud detection and prevention policies in place, leaving them more vulnerable to this hidden crime than they need to be. … Continue reading

If you are like many business owners and managers, you are certain there are no fraud problems in your organization. Are you really sure?

Every two years, the Association of Certified Fraud Examiners (ACFE) publishes a new version of their “Report to the Nations” (here’s the 2014 version) on the incidence and costs of organizational fraud. In every report they find that about 5% of top line revenue is lost worldwide to thefts by employees, owners, or partners with access to an organization’s resources.

The aggregate monetary cost of these losses is staggering, and does not even estimate the on-going costs of damages to reputation. ALL types of organization are vulnerable, and ALL types of employees and owners perpetrate these thefts. The only distinctive pattern in the data year after year is that fraud is a ubiquitous problem.

And yet, we often find organizations that have no preventative measures in place against fraud, and take no effective actions to detect it. This complacency is a common human trait: if nothing has happened in the past, nothing is going to happen in the future. Predicting the future based on historic patterns is a powerful tool, and it is often accurate. … Continue reading

We know the prevalence of occupational fraud is very high, costing organizations of all kinds an average of 5% from top line revenue every year. But what this means is that the importance of preventing these human risk frauds has a high payback, as well.

Owners and managers—employers generally—have a very strong incentive to discover every clue that exists within their own organizations to root out risky people, or at least to make it difficult for them to perpetrate frauds.

Occupational fraud is an intentional, hidden crime, sometimes not detected until years after it starts. Therefore, in order to know where to look within the organization for the potential perpetrators even before the frauds are discovered, it will help to know what characteristics fraudsters are likely to have. In other words, knowing what fraudsters are like can help improve the detection of hidden frauds, or to prevent them in the first place. … Continue reading

The 2014 edition of the Association of Certified Fraud Examiners (ACFE) report on occupational fraud confirms and extends previous findings that fraud is a persistent threat across time and borders. Extrapolating the incidence of fraud from the 1,483 cases included in the study to the estimated world GDP, ACFE estimates that occupational fraud cost as much as $3.7 trillion in 2013.

The report classifies occupational fraud into three broad categories:

• Corruption—such as bribery, conflicts of interest, and extortion
• Asset misappropriation—such as theft of cash, fraudulent disbursements, and inventory manipulation
• Financial statement fraud

Of these, asset misappropriation is the most common, but results in the smallest median loss of $130,000 per case. Financial statement fraud is relatively uncommon, but results in a median loss of over $1 million. … Continue reading