The Gotcha’s Have It–Business Fraud

The Association of Certified Fraud Examiners has published its 2016 Global Fraud Study. You can review the entire study at http://www.acfe.com/rttn2016/costs.aspx. In the meantime, I’ve included a few highlights for you to ponder:

  • “Typical organization loses 5% of annual revenues to fraud.” Given our daily fight for margin, this is a staggering, but not new, figure.
  • Controls matter. Organizations without fraud controls such as proactive data monitoring, reporting hotline and management review, lost twice as much as those organizations with fraud controls.
  • The most common detection method was through tips. Hotlines yield more tips. Another reason to engage with your employees.
  • The median loss of $150,000 was similar for large and small organizations.
  • First-time offenders perpetrated the most fraud. Only 5.2% of perpetrators had previously been convicted of fraud, and only 8.3% had previously been terminated for fraud. Personally, I think these statistics are understated since many employers do not pursue criminal charges.
  • Employees in 78.9% of cases exhibited red flags during the fraud. Suspicious behaviors included living beyond means, excessive control issues, unusually close relations with a vendor or customer, financial difficulties, family problems including divorce and unscrupulous behavior associated with a “wheeler-dealer” persona.

As the saying goes, “Trust but Verify.”

LK Greer

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