The People Bulletin

Further to The People Bulletin’s exposé of fraud risk from accounts temporary staff, [1] new research from the Association of Certified Fraud Examiners (ACFE), a worldwide provider of anti-fraud training and education, has found that the average fraud perpetrator has no prior fraud charges or convictions.

The ACFE’s 2010 Report to the Nations on Occupational Fraud & Abuse[2] based on cases between January 2008 and December 2009 uncovered the following important findings about fraud perpetrators:

• High-level perpetrators cause the greatest damage to their organisations. Frauds committed by owners/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.
• Fraud offenders were likely to be found in one of six departments. More than 80% of the frauds in the study were committed by individuals in accounting, operations, sales, executive/upper management, customer service or purchasing.
• More than half of all cases in the study were committed by individuals between the ages of 31 and 45. Generally speaking, median losses tended to rise with the age of the perpetrator.
• Most of the fraudsters in the study had never been previously charged or convicted for a fraud-related offense.  Only 7% of the perpetrators had been previously convicted of a fraud offence.
• Fraud perpetrators often display warning signs that they are engaging in illicit activity. The most common behavioural red flags displayed by the perpetrators in our study were living beyond their means (43% of cases) and experiencing financial difficulties (36% of cases).

The information helps arm owners, managers, anti-fraud professionals, law enforcement and others with more insight into the risk factors of fraud.

“Fraudsters exhibit behavioral warning signs of their misdeeds,” said ACFE President James D. Ratley, CFE.  “It’s important to remember that this human element of fraud - demonstrated in red flags such as living beyond one’s means or exhibiting control issues - is not identified through an audit or other traditional controls.

“This is why the staff at any organisation should be trained to recognise these and other common behavioural signs that a fraud might be occurring,” Ratley said. “Moreover, they should be encouraged not to ignore such red flags, even when discovered by accident, as they might be the key to detecting or deterring a fraud.”

[1] ‘ Is your accounts department at risk of being infiltrated by fraud ‘temps’, The People Bulletin, 19 May 2010. 

[2]  www.acfe.com/rttn/2010-rttn.asp