According to the Association of Certified Fraud Examiners (ACFE), a single case of occupational fraud costs the victim organization an average of more than $1.5 million, and Certified Fraud Examiners (CFEs) estimate that organizations lose 5% of their revenues each year to fraud. In the ACFE’s 2020 Report to the Nations, a study of 2,504 cases of occupational fraud investigated by CFEs in 125 countries, the typical fraud lasted 14 months before it was detected and caused a median loss of $8,300 a month.
In an effort to educate organizations on the reality of fraud and to increase awareness of the controls that can help reduce fraud, each year the ACFE sponsors Fraud Awareness Week. Today marks day one of our Fraud Week series, Fraud Stories and Lessons Learned, and we are pleased to introduce Milton de Oca, Director of Operations for Lowers & Associates International. Prior to joining L&A, Milton served 32 years as a police officer with the Miami police department, a gangs sergeant, and finally, as the commander of the intelligence and terrorism unit.
Milton tells the story of an attempted fraud he and the L&A team helped to uncover and resolve in South America related to the procurement of ballistic vests that were to be used for dignitary protection.
Listen to the story here:
This interesting case demonstrates that fraud can come in many forms and at any level. Often it takes a considerable amount of investigation to uncover the fraud and while, in this case, we were able to exonerate the client of the loss, the ACFE reports that most organizations (54%) do not ever recover the losses they suffer at the hand of occupational fraud.
Milton advises all organizations to enlist the help of an independent outside source in cases like these in order to conduct an unbiased investigation.
Stay tuned tomorrow for another fraud story from the front lines of Lowers & Associates.
In the 2016 update to the invaluable Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) analyzed 2,410 cases of occupational fraud that cost more than $6.3 billion in losses. Extrapolate this to the total number of organizations at risk and you can understand why ACFE has found in report after report that about 5% of top line revenue is lost to fraud every year, worldwide (download the ACFE The Staggering Cost of Fraud PDF).
Unlike the human capital risks of complacency or turnover, occupational fraud is an intentional act to steal from the organization. It involves a conscious attempt by someone within or linked to the organization to seek “personal enrichment through the deliberate misuse of misapplication of the employing organization’s resources or assets” (ACFE).
Needless to say, fraudsters have every incentive to remain hidden, so a well-executed fraud can go on for years. The intentional, hidden nature of fraud puts the emphasis in risk management on identifying potential fraudsters (preferably before you hire them) and limiting and monitoring the opportunities for fraud.
Despite the wealth of well-publicized information about the high prevalence of organizational fraud and the high costs of fraud, it is always surprising to learn that so many companies operate without systematic fraud prevention programs, or fail to review their programs on a regular basis.
In fact, there are very important reasons fraud prevention is worth the effort. Here are some of them: … Continue reading
The Edward Snowden case and the theft of Target customer data have both driven home the point that cybersecurity is an emerging, and rising, risk issue for both companies and political entities. But there are other risks that emerge as rapidly-changing multi-market regulatory and business interactions redefine the landscape.
Every year business consultant CEB (Corporate Executive Board) issues a list of emerging risks that sharp companies need to address to stay ahead of the game. This year they recommend managers pay special attention to these 10 specific risks: … Continue reading
Fraud is a very real threat to the bottom line of almost every organization in our economy. But it can be prevented, or at least mitigated.
There are 3 steps in setting up a fraud prevention program in your organization:
Understand what fraud is and how it is likely to emerge.
Identify potential sources of fraud in your organizations.
Take steps to prevent fraud through processes or controls.
Ultimately, a healthy anti-fraud corporate culture that permeates from the top down will make your organization more crime resistant. This will take time to nurture, and it will take continuous effort to sustain, but in the end you can make occupational fraud an extinct disease in your workplace.