Who’s a typical person doing fraud in his workplace – and typically it is a man? In western Europe, mostly he has a university degree education, and his media age is 45. Those are among the findings in the industry association ACFE’s global survey of occupational fraud. Accounting, sales and upper or executive management are the three top departments for such fraud to happen in, according to ACFE. Most occupational fraudsters are first-time offenders, it’s suggested.
For the full 92-page report visit http://www.acfe.com/rttn2016/docs/2016-report-to-the-nations.pdf. To see by world region a snapshot profile of the fraud perpetrators from that region, including level of authority, gender, age, education and department or job function, visit – http://www.acfe.com/rttn2016/perpetrators/data-by-region.aspx.
For more about the UK chapter of ACFE, visit http://www.acfeuk.co.uk/. Its next UK conference is in London on September 22.
Asset misappropriation was by far the most common form of occupational fraud, occurring in more than four in five, 83pc of cases, but causing the smallest median loss of $125,000. Financial statement fraud was on the other end of the spectrum, causing a far higher median loss. Among the various forms of asset misappropriation, billing schemes and check tampering schemes posed the greatest risk based on their relative frequency and median loss. In most cases in the study, the perpetrator took some efforts to conceal the fraud. The most common concealment methods were creating and altering physical documents.
Organisations of different sizes tend to have different fraud risks, the ACFE suggests. Corruption was more prevalent in larger organisations, while check tampering, skimming, payroll, and cash larceny schemes were twice as common in small organisations as in larger. Fraud perpetrators tended to display behavioural warning signs when they were engaged in their crimes. The most common red flags were living beyond means, financial difficulties, unusually close association with a vendor or customer, excessive control issues, a general “wheeler-dealer” attitude involving unscrupulous behaviour, and recent divorce or family problems. At least one of these red flags was exhibited during most cases.
How to prevent, uncover
The most common detection method was tips from staff (that is, not audit or other ‘active detection’). In cases detected by tip-offs at organisations with formal fraud reporting mechanisms, telephone hotlines were the most commonly used method (39.5 per cent). However, tips submitted via email (34.1pc) and web-based or online form (23.5pc) combined to make reporting more common through the internet than by telephone. And whistleblowers were most likely to report fraud to their direct supervisors (20.6pc of cases) or company executives (18pc). The study pointed to seven key departments: accounting, operations, sales, executive/upper management, customer service, purchasing, and finance.
The association brought out its first report in 1996, the ACFE president James D Ratley recalled in a foreword to the document. He said: “If there is one great contribution the Report to the Nations has made to the anti-fraud community, it has been in helping to raise the general level of awareness about fraud risk. We now live in a world where virtually all business and government organizations understand that fraud is a threat they must deal with. That was most certainly not the case in 1996.”
