Fraud is likely among the most costly and common forms of financial crime in the world. There are two reasons why fraud is so prevalent: First, any organization with employees must entrust those employees with access to or control over its assets (e.g., keeping its books, managing bank accounts, or safeguarding inventory). It is this trust that can make organizations vulnerable to fraud. Second, there are so many people in a position to commit these crimes and if even a tiny percentage of these individuals cross the line, the result is millions of fraud schemes being committed annually.
The ACFE’s report to the nations on fraud is based on 2,110 cases of fraud that were investigated between January 2020 and September 2021. The goal of the report is to compile detailed information about fraud in five critical areas:
- Methods by which fraud is committed
- Means by which frauds are detected
- Characteristics of organizations that are victimized by fraud
- Characteristics of people who commit fraud
- Results of the cases after the frauds have been detected and the perpetrators identified
There are three primary categories of fraud: Asset misappropriation, financial statement fraud, and corruption. Asset misappropriation (e.g., stealing or misusing employer’s resources) is the most common form, with 86% of cases falling under this category and a median loss of USD 100,000. Contrarily, financial statement fraud schemes (e.g., intentional material misstatements) are the least common (only 9%) but costliest (USD 593,000) category. Corruption (e.g., bribery, conflicts of interest, and extortion) falls in the middle in terms of both frequency (50%) and losses (USD 150,000).
You can download the full report here.