Organizations Lose 5 Percent of Revenues to Fraud

Organizations worldwide lose an estimated 5 percent of their annual revenues to fraud, according to a new survey of Certified Fraud Examiners.

Based on the estimated 2011 gross world product, that figure translates to a potential total fraud loss of more than $3.5 trillion. The survey by the Association of Certified Fraud Examines, polled CFEs who investigated cases between January 2010 and December 2011.

The Association of Certified Fraud Examiners published the results of the survey in its new 2012 Report to the Nations on Occupational Fraud & Abuse. The report includes global data among the 1,388 cases of fraud that were studied.

The study found that the median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of the cases caused losses of at least $1 million. The frauds in the study lasted a median of 18 months before the schemes were discovered.

“As in previous years, what is perhaps most striking about the data we gathered is how consistent the patterns of fraud are around the globe and over time,” ACFE president and CEO James D. Ratley, CFE, wrote in the introduction to the report. “We believe this consistency reaffirms the value of our research efforts and the reliability of our findings as truly representative of the characteristics of occupational fraudsters and their schemes.”

The study found that occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.

The median loss among frauds committed by owners and high-level executives at companies was $573,000, while the median loss caused by mid-level managers was $180,000, and the median loss caused by lower-level employees was $60,000.

The smallest organizations in the study suffered the largest median losses. These organizations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.

The report is available for download at

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