Occupational Fraud Trends: ACFE Report to the Nations 2020

Posted on 08.04.2020

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The Association of Certified Fraud Examiners (ACFE) Report to the Nations is a wealth of insight into occupation fraud and employee theft – and the 2020 Report is just as illuminating as its predecessors.

We’ve compiled some of the highlights from the 2020 Report that we think will be of interest to businesses. Read on for the overview.

Occupational Fraud Overview

· The typical fraud case lasts 14 months before detection and causes a loss of $8,300 per month.

· 80% of fraudsters faced some form of internal discipline.

· Yet 46% of organizations declined to refer cases to law enforcement.

· While all industries are subject to fraud, the ACFE report showed that the most susceptible include Banking and Financial Services, Government and Public Administration, Manufacturing, Healthcare, and Energy.

Common Schemes:

· Corruption (the most common scheme in every global region).

o This includes conflicts of interest, bribery, illegal gratuities, and economic extortion.

· Asset misappropriation schemes (the most common and least costly with $100,000 median loss).

o This includes cash fraud, such as theft, skimming, and larceny, fraudulent disbursements, and misuse or larceny of inventory/all other assets.

· Financial statement fraud schemes (the least common and most costly with $954,000 median loss).

o This includes net worth/net income overstatements and understatements.

· In small businesses, billing fraud, payroll fraud, and check and payment tampering were more common than in large organizations.

· In one-third of the cases ACFE examined, the fraudster committed more than one type of occupational fraud. 5% participated in all three categories.

Who Commits Fraud:

· More than 50% of fraud cases happened in the Operations, Accounting, Executive/Upper Management, and Sales departments.

· Men committed 72% of all occupational fraud and caused larger losses than women (men had a $150,000 median loss whereas women had $85,000).

· Owners/executives committed only 20% of occupational frauds, but they caused the largest losses ($600,000 median loss vs. $150,000 for a manager and $60,000 for an employee).

· 42% of occupational fraudsters were living beyond their means.

· 26% were experiencing financial difficulties.

· The majority of fraudsters had been with the organization for a long time, between one to 10 years. While those who had a longer tenure committed fewer cases, the cases they did commit had a higher median loss.

Fraud Prevention:

· Anti-fraud controls, including a fraud hotline, anti-fraud policy, fraud training for employees, managers, and executives.

· A tip detected 43% of occupational fraud cases.

· Internal audits and management reviews detected 15% and 12% respectively.

· Employees are most likely to report occupational fraud (50%) and in 22% of cases, a customer reported it.

· Background checks during the hiring process (more on this below…)

Where Do Background Checks Fit In?

· While most occupational fraud perpetrators do not have a criminal history, ACFE said that it is “still prudent for organizations to run background checks (to the extent legally permissible) during the hiring process to avoid letting known fraudsters in through the front door.”

· Only 48% of the organizations in the ACFE study undertook a background check when hiring the perpetrator.

· Of the 52% that did run a background check, 13% of them uncovered a red flag and proceeded to hire them anyway.

· Employment history and criminal checks were the most common screenings (81% and 75% respectively) but reference checks were only conducted 56% of the time and credit checks were only run in 38% of cases.

As the ACFE wrote, “no organization is immune from occupational fraud, and these crimes can originate from anywhere within the organization.”

At Triton Canada, we are committed to helping create safer work environments and catching fraud flags early. We offer pre-employment screenings that can tell you more about new hires early on, including a criminal history check, credit check, reference checks, and more.

These same screenings can also be used in the post-employment process to catch potential fraud flags for longstanding employees (as the ACFE Report noted, most fraud is committed by people who have been with the organization for at least one year).

Read the full ACFE Report to the Nations 2020 here: https://acfepublic.s3-us-west-2.amazonaws.com/2020-Report-to-the-Nations.pdf

Get in touch with us today to learn more about pre-and-post employment screenings in Canada. Call 1-844-874-8667 or visit www.tritoncanada.ca.