Between 2012 and 2022, fraud cases were caught faster, causing smaller losses according to data in Occupational Fraud 2022: A Report to the Nations. The report, which looked at fraud trends over the past 10 years, also showed that criminal prosecutions of fraud cases were down, while civil cases were up.
March 31, 2022 (Austin, Texas): More than $4.7 trillion is lost annually to occupational fraud worldwide, according to the latest data in Occupational Fraud 2022: A Report to the Nations, released by the Association of Certified Fraud Examiners (ACFE). The report was compiled from 2,110 real cases of fraud investigated in 133 countries, which totaled $3.6 billion in losses, with an average loss per case of $1.78 million. Case data was submitted to the ACFE, which represents more than 90,000 anti-fraud professionals around the world. These frauds, which are committed by individuals against their employers, affected organizations in every region and industry. The report is the most comprehensive study available of the costs, methods, victims and perpetrators of occupational fraud.
“This is just a snapshot,” said John Warren, J.D., CFE, Vice President and General Counsel of the ACFE, who co-authored the report with Research Director Andi McNeal, CFE, CPA. “Occupational fraud is likely the costliest and most common form of financial crime in the world. This is bigger than healthcare fraud, tax evasion, money laundering and identity theft.” The surveyed Certified Fraud Examiners estimate that the typical organization loses 5% of revenue to fraud each year.
This year’s report, which examined cases of fraud that were investigated in large multi-national businesses, small private companies, government agencies and nonprofits from January 2020 to September 2021, covered two areas not included in previous reports: The impact of the COVID-19 pandemic and fraud involving cryptocurrency.
Pandemic-related fraud: It was clear that the pandemic had an impact on occupational fraud cases — both by giving employees new opportunities to commit fraud and by offering organizations new ways to detect it. In fact, half of all fraud cases in the study were affected by the pandemic in some way. With more employees working remotely and organizations implementing major changes in processes, the pandemic created more potential opportunities for fraud in some organizations, as well as bolstering anti-fraud controls in others.
Cryptocurrency-related fraud: The report found that 8% of occupational fraud cases involved cryptocurrency. The most common ways cryptocurrency was used included making cryptocurrency bribery and kickback payments or converting misappropriated assets to cryptocurrency.
“The last two years have resulted in many changes in the business environment—and have evolved the fraud landscape as a result,” said McNeal. Whether it is new payment methods like cryptocurrency or pandemic-related shifts, our latest study shows how both fraud risks and anti-fraud programs are being shaped by these developments.”
The report, for the first time, also examined fraud trends over the past 10 years. Between 2012 and 2022, fraud cases were caught faster, causing smaller losses. Criminal prosecutions of fraud cases were down, while civil cases were up. Additionally, more of the fraudsters were higher up on the organizational ladder and the gap between male and female fraudsters shrank — with women catching up with men in terms of how much they steal. “Awareness of fraud and fraud risk is a lot higher than 10 to 15 years ago,” Warren said. “The good news is that we’re getting better at catching them — quicker and with lower losses. But at the same time, the total losses we are seeing in the report are huge.”
The best way to stop occupational fraud remains something available to all organizations: Create anti-fraud controls and train employees how to use them. In the report, tips were the most common way fraud was detected. With their high success rate and low implementation cost, all organizations should have a tip hotline or mechanism to report fraud. While in the past hotlines were phone lines that employees could call to anonymously report fraud, hotlines today can include forms on a webpage or a special e-mail set up to collect tips. “No matter how much we try to use advanced tools to detect fraud, the main way it gets detected is by tip, someone reporting it,” Warren said. “That’s why you need anti-fraud programs. You have to have a hotline; you have to have people know how to tell you.”
It’s also important for employees to know what to look for. If co-workers are living beyond their means — driving a fancy car, going on extravagant vacations or buying items that seem out of place — don’t be afraid to dig deeper.
Irritability, bullying and secretiveness are also red flags. “Look at behavioral characteristics. People think of these as numbers crimes, but they’re people crimes,” Warren said. “People are showing you clues of what they’re doing. If somebody robs a bank, they’re never going back to the bank again. If a manager embezzles from a bank, they’re going back there every day. The stress is incredible. They’re irritable, bullying, not sharing work, living lifestyles that they shouldn’t be able to afford. Humans are really bad at ascribing bad intentions to people they like. We want people to make that connection more quickly. Employees have to know what they’re looking for and need a way to report it. If employees have been trained on what fraud looks like and know how to make a confidential report, they can call the company and the company can act on it.”
Occupational Fraud 2022: A Report to the Nations is available for download online at ACFE.com/RTTN.
The first Report to the Nations was published by the ACFE in 1996. The ACFE has published subsequent editions every two years since 2002. Now in its 12th edition, the report has come to be regarded as the most authoritative statistical resource available on occupational fraud.
About the ACFE
Founded in 1988 by Dr. Joseph T. Wells, CFE, CPA, the Association of Certified Fraud Examiners (ACFE) is the world’s largest anti-fraud organization. Together with more than 90,000 members, the ACFE works to reduce business fraud worldwide and inspire public confidence in the integrity and objectivity within the profession. To learn more, visit ACFE.com.
Contact the ACFE
For more information, email PR@ACFE.com.