Associaton of Certified Fraud Examiners Releases 2012 Global Fraud Study

The Association of Certified Fraud Examiners (ACFE) had released its 2012 "Report to the Nations on Occupational Fraud and Abuse". As all ACFE studies, it is a trove of interesting and useful, if sometimes alarming, data.

The current study analyzes data from 1,388 verified fraud cases from around the world and these data were reported via an online survey of ACFE members between October and December of 2011. To be included in this study, the investigation of these cases must have been completed at some point between January 2010 and the time of the survey.

Among the many compelling findings found in their executive summary are the following:

• On average, survey participants estimated that typical organizations are losing approximately 5% of revenues each year to fraud and abuse. (This corresponds closely to the figure frequently cited for major corporations in the U.S. So, these findings suggest that this estimate is both worldwide and probably, in fact, unrelated to the size of the organization.)

• The median fraud loss in this sample was $140,000 but more than a fifth of the cases resulted in losses of greater than $1,000,000. (Here again, theses figures correspond relatively closely with domestic U.S. studies from the last several years.)

• Occupational fraud reported in this study was far more likely to have been discovered by a coworker than through formal oversight and audit programs. (This is why effective ethics and compliance training must help employees learn to recognize danger signs for fraud and abuse as well as how best to respond to them. After all, they are the folks most likely to actually notice something is amiss. Obviously, formal oversight and auditing process are critically important; just don't fool yourself into thinking that they are any more effective than they actually are.)

• A significant majority of the perpetrators in this study (87%) had neither been charged or convicted of a fraud-related offense or punished/terminated by a previous employer for fraud. (This provides stil more data supporting the already-large pool of evidence that, despite our stereotypes, only a fraction of fraud and fiscal abuse is perpetrated by the 'criminaly-minded', reagrdless of one's definition of 'criminal-mindedness'.)

It is interesting that, as has often been the case with ACFE studies, these findings are based on 'worst case' reports of informants. (In other words, informants were asked to report on the worst case they had seen during the study period.) Although in theory that should skew these data significantly in the direction of overly liberal estimates, the findings are far more similar than different to those of other studies not using a 'worst case' data set. It's tough to know exactly what that means but my money is on the likelihood that patterns of fraud and abuse are so similar across cases that the range from best case to worst case, once the amount is large enough to be both reported and material, is actually smaller than one might imagine.

Much, much more is reported in this current ACFE report and giving it more than a passing glance is highly recommended.