Here is what we noticed
The Association of Certified Fraud Examiners have just released a report detailing their extensive research into fraud. Breaking down the cost, the detection systems and the most common ways fraud is carried out. The report had some interesting finds amongst its extensive 80 pages. Here are some key findings.
How much is fraud costing us?
As the ACFE point out, fraud can have devasting impacts on organizations across the world. It is paramount that these organizations know how much is at risk, so they better understand how to apply their efforts in the fight against fraud. This report sheds light on the statistics to help us understand just how much we lose to fraud.
According to the ACFE’s findings, the majority of organizations reported a loss of less than $200,000 as a result of occupational fraud. This represented 55% of organizations on which research was conducted for the survey. However, the second highest majority, 22% report that they were affected by losses of over $1 million.
In total, the ACFE estimates that the cost of occupational fraud to organizations analysed in their study exceeded an amount of $7.1 billion.
How is fraud most commonly committed?
The findings of ACFE’s research is interesting to say the least and sometimes shocking. They indicate that occupational fraud is the most common, meaning the fraudster worked for the company or business that was attacked – essentially an inside job.
In 89% of the cases analysed, asset misappropriation was the method of fraud committed. However, as they point out in the report, these attacks were also the least costly to the victims.
The second most common form of fraud, according to the ACFE’s findings, is corruption, which accounted for 38% of the cases. This was also the second most costly. The least common method, financial statement fraud, was surprisingly the costliest out of the 3 by far.
In comparison, asset misappropriation costs organizations a median of $114,000 whereas financial statement fraud costs a median of $800,000. This difference is immense and is likely the reason many fraudsters opt for the lower reward as it is also the least risky.
How is fraud commonly detected?
The most crucial take-away for businesses from this report should be the most common detection methods. Understanding how to catch fraudsters red handed is one thing but being able to detect them as early as possible can save you more money.
The ACFE asked those that participated in the survey to reveal how they most commonly detect fraud in hopes that this information helps us better detect fraud in the future.
The most common by far are inside tips from suspicious employees. They account for 40% of all detection methods. These tips were often reported anonymously from people who didn’t want to face backlash or be personally attacked for whistleblowing.
The report highlights the significance of hotlines in detecting fraud using tips. The results from their findings show that organizations that set up hotlines had a much higher chance of detecting fraud by encouraging more tips. This not only helps organizations detect fraud in the future but helps prevent any further monetary losses as a result.
ACFE’s research shows that organizations who used hotlines reported 50% less of a loss as a direct result of the hotline. Using hotlines to detect fraud may be the best defence against these merciless attacks and more organizations should be encouraged to utilize hotlines in the fight against fraud.