Association of Certified Fraud Examiners releases 10th Report to the Nations on occupational fraud and abuse

The 10th ACFE Report to the Nations was published in August 20181. The 2018 report included statistics and other learnings pertaining to 2,690 occupational fraud cases from 125 countries (a total of 38 reports were received in relation to occupational fraud cases in Australia). The 2018 iteration had some interesting findings in relation to the ways in which fraud and corruption occur across 23 major industry categories. The report draws on the experience of more than 65,000 ACFE members around the world.

Highlights of the 2018 edition were:

  • It is estimated that the typical organisation loses the equivalent of around 5% of revenues in a given year as a result of fraud;
  • Total losses for the two year survey period exceeded US$7 billion, with a median loss per case of US$2.7 million;
  • 22% of the reported cases caused losses of more than US$1 million;
  • Median duration of a fraud scheme was 16 months;
  • Asset misappropriation was the most common form of occupational fraud, occurring in more than 89% of reported cases but was also the “least costly”;
  • Financial statement fraud were the least common but the most costly (Median loss of US$800,000);
  • Most common forms of detection were tips (employees and outsiders) 40%, Internal Audit 15% and Management Review (13%);
  • 50% of corruption cases were detected by tip compared with 38% for each of asset misappropriation and financial statement fraud;
  • Organisations with hotlines received more tips than organisations without hotlines (46% of cases detected by tip were received by organisations with a hotline compared with 30% of cases detected by tip in organisations without a hotline);
  • Median loss for SMEs (< 100 employees) was double the median loss of larger organisations (> 100 employees) – US$200 000 for SMEs compared with USD104 000;
  • Internal control weaknesses were responsible for almost 50% of the frauds detected;
  • 18 anti-fraud controls analysed were associated with lower levels of fraud loss and quicker detection;
  • Losses caused by men were 75% larger than losses caused by women;
  • Losses significantly higher where there was collusion;
  • Data monitoring, analysis and surprise audits were strongly linked to fraud reduction;
  • Over the last ten years, referrals for prosecution declined by 16% (main reason being the fear of negative publicity);
  • Overall there was full recovery in 15% of cases, while partial recovery was achieved in 32% of cases and nil recovery in 53% of cases; and
  • Fraudsters who were with their organisation longer stole twice as much (US$200,000 median loss where employee had > five years tenure compared with US$100,000 where employee had < five years tenure).