Occupational Fraud: Key highlights from ACFE 2022 Report to the Nations

The?Association of Certified Fraud Examiners?(ACFE) recently issued its biennial report to the Nations on occupational or employee fraud, which examines fraud committed by individuals against their employers. According to the ACFE, it's one of the costliest forms of financial crime. There are more than 3.3 billion people in the global workforce, and ACFE says nearly all of them have access to or control some portion of their employer's cash or assets.

The most recent report to the Nations analysed over 2,110 cases of occupational fraud that anti-fraud professionals around the world investigated between January 2020 and September 2021. The report forms one of the most comprehensive global summaries of the costs, methods, victims and perpetrators of occupational fraud.

This year's report, which examined fraud cases investigated in large multi-national businesses, small private companies, government agencies and non-profits, covered two areas not included in previous reports: The impact of the COVID-19 pandemic and fraud involving cryptocurrency.

Pandemic-related fraud

It was clear that the pandemic impacted occupational fraud cases by giving employees new opportunities to commit fraud and offering organisations new ways to detect it. Half of all fraud cases in the study were affected by the pandemic somehow. With more employees working remotely and organisations implementing significant changes in processes, the pandemic created more potential opportunities for fraud in some organisations and bolstering anti-fraud controls in others.

Cryptocurrency-related fraud

The report found that 8% of occupational fraud cases involved cryptocurrency. The most common ways perpetrators used cryptocurrency included making cryptocurrency bribery and kickback payments or converting misappropriated assets to cryptocurrency.

The last two years have resulted in many changes in the business environment—and have evolved the fraud landscape as a result. Whether it is new payment methods like cryptocurrency or pandemic-related shifts, our latest study shows how both fraud risks and anti-fraud programs are being shaped by these developments - Research Director Andi McNeal, CFE, CPA

The report also examined fraud trends over the past 10 years for the first time. Fraud cases were caught faster between 2012 and 2022, causing more minor losses. Criminal prosecutions of fraud cases were down, while civil cases were up. More of the fraudsters were higher up on the organisational ladder, and the gap between male and female fraudsters shrank — with women catching up with men in terms of how much they steal.

Awareness of fraud and fraud risk is a lot higher than 10 to 15 years ago. The good news is that we’re getting better at catching them — quicker and with lower losses. But at the same time, the total losses we are seeing in the report are huge. Said John Warren, J.D., CFE, Vice President and General Counsel of the ACFE

According to the latest report, some fraud trends have been constant:

• Organisations continue to lose about 5% of revenue to fraud each year
• Asset misappropriation is the most identified scheme
• Corruption continues as the most widely recognised scheme in every global region
• Tips are the best method of detection
• High-level perpetrators do the most damage
• The more extended fraud goes unchecked, the higher the median loss
• Lack of internal controls and override of existing controls is still the primary causes of why occupational fraud occurs within the organisation

Other key highlights of this year's report that are crucial for risk and compliance practitioners to note:

• Organisations with hotlines detect fraud more quickly and have lower losses than organisations without hotlines
• Other forms of cryptocurrency fraud have emerged and are commonly used to make bribery, kickback payment, and convert misappropriated assets.
• With little to 6% of the perpetrator having prior fraud convictions, employers can potentially hire the perpetrators without notice. Therefore, a background investigation is crucial for detecting the behavioural red flag from past employment or history.
• Fraud awareness training is vital for organisations to gather tips from employees through formal reporting mechanisms and hotlines.
• Implementing anti-fraud controls helps organisations lower fraud losses and detect fraud quicker.
• Increasing management review procedures and proactive data monitoring or analysis are what most victim organisations do following fraud incidents. Reviewing management procedures to adopt international best practice standards like ISO 37001 Anti-bribery Management Systems can be one of the modified measures to counter occupational fraud.

With these findings from the ACFE, we can build better defences against occupational financial crime. Read the full report: