Fraud Skims 5 Percent off Revenue Worldwide
Organizations worldwide lose an estimated 5 percent of their annual revenues to fraud, potentially amounting to over $2.9 trillion, according to a new study.
The study by the Association of Certified Fraud Examiners surveyed CFEs globally as part of a new report on occupational fraud. Fraud knows no boundaries, and anti-fraud professionals worldwide face more challenges than ever in detecting and combating it, said ACFE president James D. Ratley in a statement.
The median loss caused by the occupational fraud cases studied for the report was $160,000. Nearly one quarter of the frauds involved losses of at least $1 million. The 1,843 frauds in the study lasted a median of 18 months before being detected.
Fraud is a global problem, the study found. While there were differences from region to region, the ACFE found similar trends in fraud schemes, perpetrator characteristics and anti-fraud controls no matter where the fraud occurred.
Tips are an important tool in uncovering fraud. Occupational frauds are much more likely to be detected by tips than by any other means. This finding has been consistent since 2002, when the ACFE began tracking data on fraud detection methods.
High-level perpetrators do the most damage to organizations, the study found. Frauds committed by owners and executives were more than three times as costly as frauds committed by managers, and more than nine times as costly as employee frauds. Executive-level frauds also took much longer to detect.
Small businesses are especially vulnerable to occupational fraud. These organizations typically lack many of the anti-fraud controls found in larger organizations, making them particularly vulnerable to fraud.
The report is available for download at www.acfe.com/RTTN.