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 ACFE. 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