Who is most likely to commit occupational fraud?

According to a study done by the Association of Certified Fraud Examiners (ACFE) organizations lose an estimated five percent of their annual revenues to fraud. Applied to the estimated 2011 Gross World Product, this figure translates to a potential global fraud loss of more than $3.5 trillion. The median loss caused by the occupational fraud cases in our study was $140,000. More than one-fifth of the frauds involved losses of at least $1 million. The frauds lasted a median of 18 months before being detected.

A fraud suspect might not be easy to pick out of a crowd – or from a rap sheet. However, ACFE research helps identify certain common traits and red flags.

The Age Factor

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. This trend is also reflected in tenure at an organization.

The Perpetrator’s Department

Fraud offenders were most likely to be found in one of six departments: Accounting (22%) Operations (17%) Sales (13%) Executive/upper management (12%) Customer service (7%) and Purchasing (6%).

A Clean Record

Most of the fraudsters in the study had never been previously charged or convicted for a fraud-related offense. Only six percent of the perpetrators had been previously convicted of a fraud offense. This finding is consistent with prior ACFE studies.

Warning Signs and Red Flags

The most common behavioral red flags displayed by perpetrators: Living beyond one’s means (36 percent of cases) and Experiencing financial difficulties (27 percent of cases).

More Behavioral Red Flags

Unusually close association with vendor/customer (19%), Control issues; unwillingness to share duties (18%), “Wheeler-dealer” attitude (15%), Divorce/family problems (15%), Irritability, suspiciousness or defensiveness (13%), Addiction problems (8%) and Refusal to take vacations (7%).

Tone at the Top

High-level perpetrators cause the greatest damage to their organizations. 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.

The most common crimes committed in the executive suite:

Corruption (54%), Billing schemes (33%, Expense reimbursement fraud (21%), Fraudulent statements (21%), Non-cash (16%), Other schemes include skimming, cash on hand, payroll fraud, cash larceny, check tampering and register disbursements.

For more information on how to detect a fraudster using truth verification/lie detection polygraph tests in Bloemfontein and the Free State/Northern Cape Region, please contact Biodetect Truth Verification Services today at 083 413 1259 or send us an e-mail: info@biodetect.co.za

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