May 8, 2020

New Study Reveals Important Fraud Trends

Fraud is one of those unpleasant business issues that many would rather not discuss. For those who have fallen victim to fraud, it can be a challenging topic while for others they would rather not give attention to something which has never happened in the business. It is understandable why it is not a popular topic in the boardroom, but it is one that businesses of all sizes need to carefully consider. The risk of not addressing the topic is one that Atlanta businesses can not afford to take. According to the 2020 Global Study on Occupational Fraud and Abuse, a typical fraud scheme lasts 14 months and typically results in a loss of $8,300 per month. In addition, it was also revealed that small businesses are two times more likely to experience billing and payroll fraud and four times more likely to experience check tampering and payment tampering than large businesses. This information demonstrates the need to regularly review and update fraud prevention measures. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key findings below.

About the Study

The study contains information from 2,504 cases of occupational fraud committed between January 2018 and September 2019. The data used in the analysis was gathered through the 2019 Global Fraud Survey from Certified Fraud Examiners including 77 questions about fraud case investigation specifics. Key data collected includes the method of fraud employed, loss, victim organization, means of detection, and response by victim organizations. The information presented is taken from cases that occurred in 23 industries.

Key Study Insights

• Multiple Types of Fraud – The study wanted to uncover how often fraudsters used multiple types of fraud in their schemes. In cases where only one type of fraud was used, the study found 53% used asset misappropriation, 11% corruption, and 2% financial statement fraud. Where multiples types were used, it was reported 26% used asset misappropriation and corruption, 5% corruption, asset misappropriation, and financial statement fraud, and 1% corruption and financial statement fraud.
• Duration of Fraud– When implementing fraud prevention controls it is important to understand the typical length of schemes. According to the study, payroll schemes lasted 24 months, check tampering, register disbursements, financial statement fraud, expense reimbursements and billing schemes all lasted 24 months as well. Cash larceny schemes lasted 21 months, corruption 18 months, skimming 16 months, cash on hand 15 months, and noncash fraud only 13 months. It is obvious that many schemes can go on for many months before detected and remediated.
• Loss by Scheme – Since not all fraud impacts companies the same, it’s important to understand the typical loss by the scheme. The study found that financial statement fraud resulted in an average loss of $39,800, corruption $11,100, Noncash fraud $6,000, check and payment tampering $4,600, billing $4,200, cash larceny $4,000, skimming $2,900, payroll $2,600, expense reimbursements $1,400 and register disbursements $800.
• Fraud Concealment – To help in designing effective prevention and detection controls, the study analyzed common steps used to conceal the fraud. It appears that 40% created false physical documents, 36% altered physical documents, 27% altered electronic files or documents and 26% created false electronic documents. Surprisingly, in 12% of cases, there was no attempt made to hide the activity.
• Fraud Detection – The successful fraud detection method is essential to understand as it helps when designing effective prevention measures. According to the study, 43% were uncovered from a tip, 15% internal audit, 12% management review, 5% by accident, 4% account reconciliation, 4% external audit, 3% document examination, 2% IT controls, and 1% through a confession.
• Loss by Industry – The study also analyzed which industries were more likely to experience a higher loss due to fraud. The industries experiencing the highest loss per incident include real estate with a loss of $254,000 per incident, telecommunications with a $250,000 loss per-incident, and healthcare with a $200,000 loss per incident. Those with the lowest loss per incident include education with a $65,000 loss per incident, insurance with a $70,000 loss per-incident, and retail with an $85,000 loss per incident.

Contact Us

The information uncovered in the report illustrates the devastating financial impact that fraud leaves in its wake. It also provides important information about the nature of common fraud schemes which is important to the design of prevention measures. If you have questions about the information outlined above or need assistance with a fraud issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.