Characteristics of occupational fraud
The Association of Certified Fraud Examiners’ (“ACFE“) Occupational Fraud 2024: A Report to the Nations is a key report to bring to light and provide meaningful data on fraud, embezzlement and misappropriation of assets in the workplace (fraud). The bi-annual report analyzes 1,921 actual fraud cases from 138 countries and territories investigated between January 2022 and September 2023.
Global losses due to fraud
The study shows that organizations are estimated to lose about 5% of their annual revenue to fraud, with a total losses of over 3,1 billios US dollars. The average loss of an analyzed fraud case was 1,6 million US dollars.
COVID-19 and fraud
More than half of the cases show at least one pandemic-related factor that contributed to fraud. This suggests that many fraud cases occurred at the height of the COVID-19 pandemic.
Methods of detection
Technology and data analysis are playing an increasingly important role in the detection of fraud. 43% of fraud cases were discovered through tips, 52% of these came from employees and almost a third from customers and suppliers.
This means that effective fraud detection requires not only an internal reporting channel, but that any tools or hotlines should also be made available to external third parties.
Anti-fraud controls
The report emphasizes the importance of effective internal controls. More than half of fraud cases occurred due to a lack of internal controls or an override of existing controls.
The report clearly shows that existing controls not only lead to lower a level of losses, but also significantly reduce the duration of ongoing fraud.
Other important findings:
- Fraud in government organizations: The median loss per fraud case in government organizations was 150,000 US dollars. The largest losses and the highest probability of corruption occurred at the national level. Corruption occurred in over 50% of all fraud cases, which is by far the most common form of fraud in government organizations.
- Cryptocurrencies: Although only 4% of the cases in the period under review involved cryptocurrencies, this figure is expected to rise in the future. In 47% of the cases analyzed, the misappropriated assets were converted into cryptocurrencies, while in 33% of the cases, bribes or kickback payments were made to an accomplice via cryptocurrencies.
- Behavioral red flags: In 84% of the cases investigated, the fraudsters displayed at least one behavioral red flag. At 39% and 27% respectively, ‘living beyond one’s means’ and ‘financial difficulties’ were the red flags observed in personal relationships, but in 20% of cases the fraudsters also had a disproportionately close relationship with customers or suppliers.
When was the last time you conducted a data analysis to identify potential fraud scenarios or assessed the effectiveness of your internal controls and made sure that they are fit-for-purpose? Our consulting services include compliance risk analyses and risk-based transaction audits as well as conducting internal investigations to determine whether any suspected fraud can be substantiated and enforcing legal measures against the fraudsters.
