NCPA - National Center for Policy Analysis


October 13, 2008

Risky borrowing and lending are not the only way companies rack up losses.  U.S. organizations lose an estimated 7 percent of their annual revenues to fraud, and this year alone, they could lose $994 billion, according to a recent study by the Association of Certified Fraud Examiners (ACFE). 

Researchers analyzed 959 occupational fraud cases that occurred between January 2006 and February 2008, and found that more than half were discovered by accident and about 46 percent of all cases came to light because of a tip.


  • The median loss caused by the occupational frauds wad $175,000; more than one-quarter of frauds involved losses of at least $1 million.
  • Schemes frequently continue for years before they are detected; they typical fraud lasts two years from the time it begins until the time it is caught.
  • Frauds were most often committed by the accounting department (29 percent) and upper management (18 percent), and most fraudsters were first-time offenders -- only 7 percent had prior conviction and only 12 percent had been previously terminated by an employer for fraud-related conduct.
  • Small businesses are especially vulnerable to occupational fraud.
  • Nearly 78 percent of victim organizations modified their anti-fraud controls after discovering that they had been defrauded.

How can you recognize a fraudster?  ACFE offers some telltale signs: most are in their 40s, with men outnumbering women two to one; most have worked for more than five years at the company; dishonest employees often start living beyond their means; and they may also refuse to go on vacation (a time when their replacement could get a look at their transactions).

Since personal financial stress is another breeding ground for fraud, companies should be aware that 2009 could be another banner year for fraud.  In this economic climate, says ACFE, there's a temptation.

Source: Nanette Byrnes, "Profiles in Pilfering," Business Week, October 13, 2008; based upon: "Report to the Nation on Occupational Fraud and Abuse," Association of Certified Fraud Examiners, July 2008.

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