AUSTIN, Texas, USA (August 7, 2014) — What are some of the characteristics of a fraudster? The ACFE’s 2014 Report to the Nations on Occupational Fraud
and Abuse provides fascinating research on this subject, which is represented in a new infographic is available for download online: ACFE.com/RTTN-profile-fraudster.aspx.
The following are just a few interesting details about fraud perpetrators from the Report:
The higher the perpetrator’s level of authority, the greater fraud losses tend to be. Owners/executives only accounted for 19% of all cases, but they caused a median loss of $500,000. Employees, conversely, committed 42% of occupational frauds but only caused a median loss of $75,000. Managers ranked in the middle, committing 36% of frauds with a median loss of $130,000.
Collusion helps employees evade independent checks and other anti-fraud controls, enabling them to steal larger amounts. The median loss in a fraud committed by a single person was $80,000, but as the number of perpetrators increased, losses rose dramatically. In cases with two perpetrators the median loss was $200,000, for three perpetrators it was $355,000 and when four or more perpetrators were involved the median loss exceeded $500,000.
Approximately 77% of the frauds in our study were committed by individuals working in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance.
The vast majority of occupational fraudsters are first-time offenders; only 5% had been convicted of a fraud-related offense prior to committing the crimes in our study. Furthermore, 82% of fraudsters had never previously been punished or terminated by an employer for fraud-related conduct. While background checks can be useful in screening out some bad applicants, they might not do a good job of predicting fraudulent behavior. Most fraudsters work for their employers for years before they begin to steal, so ongoing employee monitoring and an understanding of the risk factors and warning signs of fraud are much more likely to identify fraud than pre-employment screening.
Most occupational fraudsters exhibit certain behavioral traits that can be warning signs of their crimes, such as living beyond their means or having unusually close associations with vendors or customers. In 92% of the cases we reviewed, at least one common behavioral red flag was identified before the fraud was detected.
The 2014 Report to the Nations includes data compiled from 1,483 cases of fraud submitted by CFEs globally. The full Report is available for download (in PDF format) online at: ACFE.com/RTTN.