The ACFE (Association of Certified Fraud Examiners) periodically publishes an analysis of occupational fraud. Its not comprehensive because it is based on information that comes from its members who were involved in the investigations of the cases. Even with this limited population, the 2018 report covers nearly 2,700 investigations conducted between January 2016 and October 2017. Here are some highlights.
- 40 percent of corruption cases were detected b y a tip. For organizations with a hotline, 46 percent of cases were detected by a tip. For those without a hotline, only 30 percent came from tips. Organizations must make a point of establishing mechanisms that encourage employees to come forward. Hotlines and guaranteed anonymity are good starting points.
- Internal control weaknesses were responsible for nearly half of frauds. Now you Government contractors understand the Government's emphasis on strong internal controls.
- Median losses are far greater when fraudsters collude.
- Small businesses lost almost twice as much per scheme to fraud than large businesses ($104 thousand per scheme for large businesses vs $200 thousand per scheme for small businesses. This is not surprising as small business have fewer resources to invest in internal controls.
- 85 percent of fraudsters displayed at least one behavioral red flag of fraud.
- A majority of the victims recovered nothing.
- Only four percent of perpetrators had a prior fraud conviction.
If you're not taking the prospect of fraud within your organization seriously, you are at risk of financial loss. Can you afford a $200 thousand loss - the average loss for small businesses covered by this survey? The full report can be found here.