July 21st, 2016 | Sterling

Stat Check 2016: Occupational Fraud and Abuse

If you recently attended Bishops’ webinar in partnership with the Association of Certified Fraud Examiners (ACFE), you were confronted with some sobering statistics on occupational fraud, including who commits it and how. The information presented was based on findings from the ACFE’s 2016 Report to the Nations, which comprised a global study of more than 2,400 fraud cases.

The ACFE’s findings indicated that the fraudster’s level of authority has a strong correlation with the size of the fraud and the amount of damages the victim organization incurs. Additionally, the research revealed that the accounting department is one of the top internal sources where fraud originates. This underscores the importance of thoroughly and carefully screening key hires within your organization, and rescreening those key employees on a regular and ongoing basis as well.

Rescreening, in particular, can help an organization detect the key signs of fraudulent employee’s behavior, one of the biggest indicators of which is when an employee begins living beyond his or her means. As reported in recent years in a top Canadian news source, a former London, Ontario teacher “was dealt a three-year prison sentence and ordered to repay the $800,000 he robbed from London-area school boards, high school sports clubs and students.” The individual oversaw the local athletic association that coordinated high school athletics in the region, and was said to have defrauded the system as he fueled a gambling addiction and undertook lavish improvements to his residence. He had sole signing authority – a key “red flag” for providing opportunity for fraud, per the ACFE – on two bank accounts belonging to the athletic association, including one the local school board wasn’t even aware of. Some of the stolen funds were said to have been used for “a $110,000 back-yard renovation to [the perpetrator’s] home, which included a water pool, a hot tub, retaining walls and interlocking pathways.” The fraudster also confessed that part of the funds went to a gambling addiction that had him buying up to 20 lottery tickets at a time, twice a day.

By establishing a strong pre-hire screening program and re-screening schedule, HR professionals can aid in creating a corporate environment that demonstrates proactivity in preventing and identifying fraud. Fraudsters feel most at home within organizations where anti-fraud controls are loose at best or nonexistent at worst.

Download the presentation here, or click here to view the ACFE’s Report to the Nations in its entirety.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.