The ending of one year and beginning of a new year is a great time to give your organization a fraud prevention check-up. This natural time of reflection and renewal provides an opportunity to better protect your organization from the risks of fraud.
The Association of Certified Fraud Examiners (ACFE) suggests that a fraud check-up can save your company from disaster. Wondering how? Consider that fraud can be catastrophic, some can even put you out of business overnight. Even if survived, a major fraud can damage your company’s reputation so severely that it can be difficult, if not impossible, to recover. Performing a fraud check-up can help you pinpoint opportunities to rid your organization of fraud. It can expose your company’s vulnerabilities and allow you to take a more proactive approach to risk management.
If you’re still questioning the importance of a fraud check-up, consider the 18 fraud facts highlighted in our latest slideshow, which come from the ACFE’s Report to the Nations on Occupational Fraud and Abuse:
Tips for performing a fraud prevention check-up
The ACFE put together this fraud prevention check-up document that walks you through 7 key areas of fraud prevention. It includes fraud risk oversight, ownership, assessment, risk management policy, process, and environment-level anti-fraud controls, along with assessment factors for each. You can use the check-up to obtain a broad idea of your organization’s performance with respect to fraud prevention. Your scores/assessments across the various criteria can expose gaps that should be closed promptly in order to reduce losses and cut your risk of future disaster.
It is important to note that the ACFE recommends the check-up be performed as a collaboration between objective, independent fraud specialists, and people within the organization who have extensive knowledge about its operations.
We invite you to request a conversation with a Lowers & Associates Certified Fraud Examiner.
Fraud Week comes at a perfect time each year, just before the start of a new year when many organizations take a structured look at their performance over the past months, and begin to prepare for the year ahead. When it comes time to review your fraud risk management and prevention plan, it pays to have some hard statistics in front of you.
Our latest slideshow features 18 facts straight from the ACFE’s bi-annual Report to the Nations on Occupational Fraud and Abuse. The report can help you understand and respond to the threat of organizational fraud in your company, and the facts presented can serve as benchmarks for your organization while helping to uncover areas you may have failed to address.
How will you use these facts to create a more effective fraud prevention plan for your company in 2018?
International Fraud Awareness Week begins next week. The point of Fraud Week, sponsored by the Association of Certified Fraud Examiners (ACFE), is to raise the visibility of occupational fraud and abuse, and to remind organizations to review and improve their fraud prevention and detection capabilities.
In case you’re thinking fraud is not an issue in your organization, you should know that extrapolating from actual fraud cases examined in 2016 and reported to ACFE, organizations worldwide lose 5% of topline revenue to fraud. Virtually every type of organization from business, government to non-profit sectors is vulnerable to fraud.
How much do you know about occupational fraud and abuse with respect to your organization? Prepare for Fraud Week by trying your hand at these questions based on ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse (answers are below):
1. Occupational frauds are most often detected in which way:
a) By accident
b) Through a management review
c) By a tip
d) By an internal audit
2. The median duration of occupational fraud is:
a) 3 months
b) 6 months
c) 18 months
d) 24 months
3. About what percentage of occupational frauds are committed by 2 or more in collusion?
4. What is the median loss to fraud?
5. The proportion of the 2016 fraud cases in the U.S. committed by owners or executives is:
6. The median loss to fraud for companies with less than 100 employees as compared to companies with 10,000+ employees are:
a) Much smaller
b) Proportionately smaller
c) About the same
7. The largest proportion of fraud is perpetrated by employees who have been with the organization:
a) Less than 1 year
b) 1 to 5 years
c) 6 to 10 years
d) More than 10 years
- c) By a tip. In 2016, tips were the most common detection method by a wide margin, accounting for 39.1% of cases. Hotlines were especially effective in generating tips.
- c) 18 months. The longer the fraud continues undetected, the higher the cost. 20% of the cases in 2016 were undetected for 36 months or longer, and cases that endured for 60+ months caused a median loss of $850,000.
- c) About 48%. In cases of fraud by collusion, the cost of the crime increased as more people were involved. A single fraudster caused a median $85,000 in losses, while a collaboration of 5 or more cost $833,000.
- b) $150,000 was the median loss. However, the average loss per case was $2.7 million, indicating that losses due to occupational fraud can be very significant.
- d) About 20%. Median loss due to fraud by U.S. owners or executives was far higher at $500,000 than for managers ($150,000) or employees ($54,000). Part of the difference is due to the fact that owner or executive fraud went undetected longer.
- c) About the same. In 2016, the median loss of a fraud case in an organization of less than 100 employees was $150,000, the same as for an organization with 10,000 or more employees. The relative impact of the loss was obviously much greater for the smaller organizations.
- b) 1 to 5 years. Employees are more likely to commit a fraud if they are familiar with the controls and systems in place, or when something in their circumstances changes over time. However, the median loss for a fraud increases regularly as the employee’s tenure lengthens.
You can learn a lot about occupational fraud and abuse by reading the 2016 Report to the Nations. Better yet, you can begin to see how you can improve your fraud prevention program to avoid being one of the cases in the Report.
The end of the year is a great time to reflect and with that, we like to share our most-read articles of the year. This year’s top articles highlight a strong focus on workplace violence risk management, including active assailant concerns. More than ever, prediction, preparation, and prevention measures are needed to keep each workplace safe. Take some time to read through our top risk management articles from 2016 and plan for a safer and more productive 2017.
1. [Infographic] How to Address the Threat of an Active Assailant Incident in Your Organization
Each and every employee and community member deserves to feel safe. OSHA requires it, labeling it as an organization’s responsibility to provide a safe workplace. Tragically, with a growing number of active assailant incidents happening all around the country, this threat is more relevant than ever before. Over a two-year span, 26 states experienced 40 active assailant incidents, resulting in more than 230 casualties.
Read the full post >
2. Building a Culture of Compliance around BSA/AML – Guidance from FinCEN
In simpler times, the Bank Secrecy Act (BSA) regulated the Anti-Money Laundering (AML) activities of banks, as the name implies. In our globalized and networked world, it has expanded to cover financial institutions ranging from the biggest banks to mom and pop check cashing, or money transfer operations running out of storefronts in a mall. The Financial Crimes Enforcement Network (FinCEN) has launched actions against businesses across this spectrum for violations of BSA/AML requirements.
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Every two years, the Association of Certified Fraud Examiners (ACFE) performs and publishes research on worldwide organizational fraud. These reports have rearranged the landscape on organizational fraud by providing a bedrock data-based description of the incidence, characteristics and impact of fraud on organizations of all types.
The 9th report in this series, the 2016 Report to the Nations on Occupational Fraud and Abuse, continues and expands the information available to organizational managers to help shape their risk management strategies to combat organizational fraud. With the sound methodology repeated by these studies over time, some solid trends have been established, but we can also see some emerging threats.
Here are 17 facts that can help you to understand and respond to the threat of organizational fraud in your organization:
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