Occupational Fraud Is a Worldwide Problem

by Tim D. Tribe, CPA/CFF, CFE, CICA

Over the years, I have been invited to speak to various groups, and in a variety of venues, on the topic of employee theft—or, as the Association of Certified Fraud Examiners (ACFE) likes to call it, Occupational Fraud. In June, I had the opportunity to speak again on this subject, this time in London, U.K.

In the past, my presentations on this issue have utilized survey data compiled by the ACFE in its annual report on occupational fraud. However, unlike in past presentations on this topic, my audience was not composed of companies and people operating primarily in the United States. Fortunately, two years ago, the ACFE shifted the focus of its report from being devoted entirely to employee theft in the U.S., to including data from Certified Fraud Examiners the world over.

For my visit to the United Kingdom, I made use of this international data which shows a significant amount of consistency with results from the U.S., and a few surprises.

Highlights from the Latest ACFE Data

  • Worldwide median occupational fraud loss totals $145,000 per occurrence. The U.S. median is $100,000.
  • The worldwide median length of time an occupational fraud goes undetected is 18 months.
  • 58% of all occupational fraud cases (worldwide) had no subsequent recovery of any of the stolen assets.
  • Small businesses (organizations with fewer than 100 employees) suffered the largest median loss.
  • On the whole, corruption cases (bribes, etc.) were both larger and more frequent outside the United States than within.
  • Gender of the perpetrator, by region:
    • Worldwide – 66.8% Male, 33.2% Female
    • U.S. – 53.9% Male, 46.1% Female
    • Western Europe – 85.1% Male, 14.9% Female
  • The Top Five Discovery Methods Worldwide (U.S. in parentheses):
    • Tip – 42.2% (38.4%)
    • Management Review – 16.0% (18.4%)
    • Internal Audit – 14.1% (13.1%)
    • By Accident – 6.8% (8.2%)
    • Account Reconciliation – 6.6% (5.3%)
  • The use of real-time data analytics as a fraud prevention tool resulted in frauds that were 60% less costly and 50% shorter in duration. Real-time data analytics utilize today’s technologies to monitor the data flowing through a company’s accounting and information systems to identify red-flags for fraud and compliance infractions.
  • The top five internal control weaknesses associated with occupational fraud (worldwide):
    • Lack of internal control – 32.2%
    • Lack of management review – 20.0%
    • Override of existing control – 18.9%
    • Poor tone at the top – 8.4%
    • Lack of competent oversight – 7.1%

Occupational fraud will never be eliminated in its entirety. But employers can glean insights from these statistics, and can take steps to reduce both the likelihood and the financial impact of occupational fraud. The most effective fraud prevention and detection tool is employee hotlines, and it is one of the cheapest.

  • The impact of having a hotline for anonymous tips (worldwide):
    • 33.3% of fraud schemes are discovered through tips in organizations without a hotline.
    • 51% of fraud schemes are discovered through tips in organizations with a hotline.

REDW fraud professionals have experience assisting companies and legal counsel with investigating and providing litigation support related to fraud matters. Our professionals also have experience consulting on fraud prevention and detection controls that are both effective and efficient. For more information, see our Forensic Accounting Services.