In today’s financial landscape, the economic effects of fraud across the world is monumental. While there have been massive developments in new tools to counter fraud, particularly in the last two decades, the presence of corruption in the corporate world is still pervasive. In fact, new reports suggest that fraud is currently at an all-time high. The Association of Certified Fraud Examiners (ACFE) recently released their findings in their 2018 Report to the Nations, based on the results of the ACFE 2017 Global Fraud Survey. This was the organization’s 10th edition of the largest global study on occupational fraud, collecting data from 125 countries in 23 major industry categories.
Utilizing the information and data from 2,690 real cases of occupational fraud, ACFE sought to unearth new trends, reveal potential new risk factors, and create new benchmarks for organizations to measure their anti-fraud efforts against. The findings are truly riveting (see above link) and we suggest downloading the report for yourself. However, some of the most noteworthy findings are as follows:
- More than $7 billion in total losses
- 16 months was the median length of a fraud scheme
- The most common fraud type was corruption, in every region across the globe
- $130,000 was the median loss per fraud case
- 88% of the cases were asset misappropriation schemes – the most common and least costly
- 10% of the cases were financial statement fraud schemes – the least common and most costly
- 50% of the corruption cases were detected by a tip
- Small businesses lost nearly twice as much per scheme to fraud
- 85% of fraudsters showed at least one behavioral red flag of fraud
- The sheer 4% of fraudsters had a prior fraud conviction
- Issues with internal control were accountable for close to half of the frauds
- The largest reductions in fraud loss and duration were linked to data monitoring/analysis and surprise audits
- The majority of fraud victims recovered nothing
The above data summary only scratches the surface of the ACFE’s findings. The ability for business leaders to wrap their heads around the actual cost of fraud is critical to correctly assessing risks and allocating resources appropriately. While the data is certainly imperfect, organizations who participated in the study lost an estimated 5% of their annual revenues to fraud. To put that number in perspective, if the 5% losses were applied to last year’s estimated Gross World Product of USD 79.6 trillion, the projected total would be nearly USD 4 trillion global fraud loss.
Therefore, while it is virtually impossible to accurately calculate the cost of fraud on a global scale, we can say with certainty that the damage of fraud is enormous. These case study findings highlight how essential the role of anti-fraud professionals truly is in the global economy.