Organizations around the world lose an estimated 5 percent of their annual revenues to fraud, according to a survey of Certified Fraud Examiners (CFEs) who investigated cases between January 2010 and December 2011. Applied to the estimated 2011 Gross World Product, this figure translates to a potential total fraud loss of more than $3.5 trillion (U.S.).
The Association of Certified Fraud Examiners (ACFE) published the results of the survey in 2012 Report to the Nations on Occupational Fraud & Abuse. The report includes global data among the 1,388 cases of fraud that were studied. According to ACFE President & CEO James D. Ratley, CFE, the latest findings continue to validate statistical trends from previous Reports.
“As in previous years, what is perhaps most striking about the data we gathered is how consistent the patterns of fraud are around the globe and over time,” Ratley writes in the introduction to the report. “We believe this consistency reaffirms the value of our research efforts and the reliability of our findings as truly representative of the characteristics of occupational fraudsters and their schemes.”
The report found that fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of these cases caused losses of at least $1 million. More worryingly, schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught. And it is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.
High-level perpetrators – the people who are most trusted- do the most damage. The median loss among frauds committed by owner/executives was $573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000.
Tips are key in detecting fraud. Occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organisation.
The smallest organisations in the study suffered the largest median losses. These organisations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.
The 2012 Report to the Nations is available for download online at the ACFE’s web site: ACFE.com/RTTN. The Report is in PDF format.