No organization or person is immune to fraud. Defined as a deliberate deception with the intent for financial gain, fraud can come in a variety of forms, making any duplicitous activity, at times, difficult to identify until it's too late. An estimate from the Association of Certified Fraud Examiners' (ACFE) "Report to the Nations, 2018 Global Study on Occupational Fraud and Abuse," states occupational fraud, also known as internal fraud, accounted for more than $7 billion in total losses globally within a 22-month period in 2016 and 2017.

Types of occupational fraud

Between Jan. 2016 and Oct. 2017, the ACFE studied 2,690 fraud cases across 125 countries to determine how much occupational fraud affects companies worldwide. Of the three most common types of occupation fraud — asset misappropriation, corruption, and financial statement fraud — asset misappropriation, alone, accounted for 89% of cases in ACFE's study. Check and payment tampering, billing, and theft of noncash assets were the costliest sub-schemes of asset misappropriation, with each occurrence costing an organization between $98,000 and $150,000. In corruption cases, 70% were perpetrated by an individual of authority, such as a manager or owner/executive. While the median cost of corruption was $250,000 in the study, the longer an offender's actions went unnoticed, the higher the loss. Frauds that lasted six months or fewer experienced a median loss of $30,000; on the other hand, frauds that lasted more than 60 months resulted in a median loss of $715,000.

How occupational fraud affects organizations

Nearly three-quarters of the frauds examined in the study occurred at for-profit companies, of which 42% were private, and 29% were public companies. Nonprofits experienced relatively small median losses at $75,000; however, given the limited resources and capital many have, any amount of fraud loss can be devastating to their operations and missions. An organization's size can affect both the opportunity for fraud and the ability to implement anti-fraud devices: "Larger entities typically have more resources to invest in their anti-fraud programs, as well as a greater ability to separate duties among staff members to help prevent fraud; however, the large staff size can also mean more potentially dishonest employees who might attempt schemes and more complex processes and transactions, which can increase the risk of fraud," the report states. As such, small businesses (fewer than 100 employees) suffered the largest median losses in the study — $68,000 more than organizations with 10,000 or more employees, and $100,000 more than companies with 100-999 employees. ACFE also examined cases based on the industry of the victim organization. The communications and publishing industry experienced just 24 fraud cases during the study period but at the highest median loss of $525,000. Meanwhile, the arts, entertainment and recreation industry suffered twice as many fraud cases but at the fraction of the loss. To find out the top 15 industries that experienced the greatest number of occupational fraud cases in ACFE's study, click through the slideshow above. Related: 

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