Scientia Potentia Est (Knowledge is Power)

The 2018 Global Study on Occupational Fraud and Abuse is hot off the press – and it’s an important resource for anyone interested in occupational fraud. The report includes valuable information on how fraud is committed, how it’s detected, who commits it, and how organizations can protect themselves. Compiled by the Association of Certified Fraud Examiners, this year’s annual report examined 2,690 cases in 125 countries across 23 industries. The results are in and here are a few key takeaways:

The Damages

  • $7 billion+ in total losses
  • $130,000.00 was the median loss
  • Small businesses (fewer than 100 employees) suffered nearly two times the amount of loss per scheme ($200,000.00) as businesses with more than 100 employees ($104,000.00)

The Schemes

  • 89% of cases represented asset misappropriation schemes
  • Asset misappropriation was the least costly: $114,000.00 median loss
  • Check & payment tampering and billing schemes were the most common
  • 10% of cases represented financial statement fraud
  • Financial statement fraud was the most costly: $800,000.00 median loss
  • Internal control weaknesses contributed to approximately 50% of all frauds

Detection

  • 50% of fraud was discovered by tips
  • Top concealment methods included:
  • Creating and altering physical documents
  • Creating and altering transactions in the accounting system
  • Destroying documents

Fraudsters

  • 82% of fraudsters were male; 18% were female
  • 70% were committed by an individual in a position of authority, such as a manager or owner
  • 85% of fraudsters displayed behavioral red flags prior to the detection of the theft
  • Living beyond means
  • Control issues and suspiciousness
  • Unusually close relationships with vendors/customers
  • Financial difficulties

The Latin phrase scientia potentia esis as true today as it was hundreds of years ago. Knowledge is power. Understanding and being aware of risk factors is key to preventing employee theft. Knowing what to look for gives employers an advantage in preventing theft and protecting their businesses. Knowledge is a powerful tool in the fraud prevention toolkit.

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