• Survey participants estimated that the typical organization loses 5% of revenues each year to fraud. If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion.
  • The median loss caused by the frauds in our study was $145,000. Additionally, 22% of the cases involved losses of at least $1 million.
  • The median duration — the amount of time from when the fraud commenced until it was detected — for the fraud cases reported to us was 18 months.
  • Occupational frauds can be classified into three primary categories: asset misappropriations, corruption and financial statement fraud. Of these, asset misappropriations are the most common, occurring in 85% of the cases in our study, as well as the least costly, causing a median loss of $130,000. In contrast, only 9% of cases involved financial statement fraud, but those cases had the greatest financial impact, with a median loss of $1 million. Corruption schemes fell in the middle in terms of both frequency (37% of cases) and median loss ($200,000).
  • Many cases involve more than one category of occupational fraud. Approximately 30% of the schemes in our study included two or more of the three primary forms of occupational fraud.
  • Tips are consistently and by far the most common detection method. Over 40% of all cases were detected by a tip — more than twice the rate of any other detection method. Employees accounted for nearly half of all tips that led to the discovery of fraud.
  • Organizations with hotlines were much more likely to catch fraud by a tip, which our data shows is the most effective way to detect fraud. These organizations also experienced frauds that were 41% less costly, and they detected frauds 50% more quickly.
  • The smallest organizations tend to suffer disproportionately large losses due to occupational fraud. Additionally, the specific fraud risks faced by small businesses differ from those faced by larger organizations, with certain categories of fraud being much more prominent at small entities than at their larger counterparts.
  • The banking and financial services, government and public administration, and manufacturing industries continue to have the greatest number of cases reported in our research, while the mining, real estate, and oil and gas industries had the largest reported median losses.
  • The presence of anti-fraud controls is associated with reduced fraud losses and shorter fraud duration. Fraud schemes that occurred at victim organizations that had implemented any of several common anti-fraud controls were significantly less costly and were detected much more quickly than frauds at organizations lacking these controls.
  • The higher the perpetrator’s level of authority, the greater fraud losses tend to be. Owners/executives only accounted for 19% of all cases, but they caused a median loss of $500,000. Employees, conversely, committed 42% of occupational frauds but only caused a median loss of $75,000. Managers ranked in the middle, committing 36% of frauds with a median loss of $130,000.
  • Collusion helps employees evade independent checks and other anti-fraud controls, enabling them to steal larger amounts. The median loss in a fraud committed by a single person was $80,000, but as the number of perpetrators increased, losses rose dramatically. In cases with two perpetrators the median loss was $200,000, for three perpetrators it was $355,000 and when four or more perpetrators were involved the median loss exceeded $500,000.
  • Approximately 77% of the frauds in our study were committed by individuals working in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance.
  • It takes time and effort to recover the money stolen by perpetrators, and many organizations are never able to fully do so. At the time of our survey, 58% of the victim organizations had not recovered any of their losses due to fraud, and only 14% had made a full recovery.


Contained in the ACFE 2014 Annual Report to the Nations




This is the trip you have been dreaming about for a long time; a foreign travel for either business or vacation. The day finally comes and the fantasies and imaginations are driving you high, you can’t wait to get to the destination. It is an adventure you are looking forward to. You, however, have missed one important point- that this ballooning wonderful feeling can easily be deflated by a single prick; fraud. This is why you have to be very cautious in the planning phase preceding your travel. Language barriers, new peculiar environment, different cultures and ignorance about the destination make visitors easy prey for scammers and fraudsters. The emergence of internet as a core channel of communication as well as payments has made it also easy for fraudsters to exploit any gaps to the detriment of travellers. Organized criminals are becoming more innovative, sophisticated and creative each passing day in an attempt to deceive and extort money from their victims, and the casualties are increasing each day, as local authorities are overwhelmed by the fraudsters’ complexity and numbers. Travellers are always advised to do a thorough research about their destinations, but above all be cautious and never drop their guard at any point, because the consequences could be disastrous. A foreign country is the last place anyone would want to be stranded at. There are varied fraud and theft schemes depending with the location while abroad, but I will explain some universal ones that you should be wary of.


While abroad, you will probably be using your company credit card and your personal credit card for some purchases. Credit card fraud is the most common electronic fraud faced by travellers. To overcome fraudsters of this type, the following tips may be of use.

Upgrade to Chip and PIN The old generation magnetic cards will put you at risk, so make sure you have upgraded your card to Chip and PIN. This two factor authentication mechanism is meant to afford you more security.

Use the Hotel Room Safe to Secure your Card When walking around and about your destination, probably sight-seeing, sometimes you may not need your card. It’s therefore important to keep it in the hotel room safe. When walking around and you need your card, don’t put it in your backpack, because it would be risky if someone snatched your backpack with the card in there. Keep the credit card in your pockets.

Notify the Issuer of impending Travel Some credit card companies track and monitor account activity and spending, and geographical area of use. If any anomalies are noted, they will immediately suspend the account pending communication with the customer. You certainly don’t want to have a blocked credit card while in a foreign country, as this would turn your adventure into a nightmare.

Carry along only the Necessary Cards Don’t carry all your credit cards along with you, only have the necessary ones. Secure the rest in your hotel room so that in case you lose your wallet while roaming, you have a fallback position.

Keep all Receipts You will need the receipts to compare with the bank statements and pick out any inconsistencies for correction by the credit card company. While paying for merchandise at the POS, ensure also that whatever amount that is charged is the right one, because some retailers deliberately double charge unsuspecting tourists. After the travel, be cautious of people purporting to be your bankers calling to say they have suspected some questionable activity on your account. They then ask for your account details and use the same to defraud you.

  1. BEGGARS                                                                                                                                                                            In some countries, begging is run as an ‘organized business’ – the children collect money on behalf of their bosses in the criminal chain. In the cases where you feel soft hearted or empathetic with the children, offer them food instead of cash. Close and lengthy contacts with them allow them to carry out their schemes, so avoid or limit lengthy encounters with them.
  1. PICK POCKETING/ DIVERSION THEFT                                                                                                          These diversion thefts occur when your focus has been shifted. Eg Good Samaritans helping out to clean some ketchup stain on your shirt with tissue, or helping you to change a flat tire. Never be distracted to take your eyes off your valuables. Always keep your attention on your valuables.
  1. CURRENCY CHANGE ‘ERRORS’                                                                                                                                  Always familiarize yourself with the currency exchange rates in the destination country, as tellers take advantage of the visitor’s ignorance.

Always familiarise yourself with the host country’s police uniform, as some conmen dressed in uniform will confront you pretending to be police officers with the intention of taking off with your valued wallet.


You certainly would like all your facebook & twitter friends to know that you are travelling abroad, but it’s advisable to avoid sharing it on social media till you are back. This is because some thieves find out whose apartment has been left unattended and break in. There is also data mining websites like www.pleaserobme .com which mine information from social media sites to know who has left the country and their property by extension.   Other common scams involved are;

  • False internet friendships and cyber romances
  • Marriage proposals delivered online.
  • Emails from suspicious organisations promising prizes, promotional offers etc.

Above all, always be alert especially when in a public commotion. When for instance someone spills a drink on you ‘by mistake’ be very cautious since while they are trying to clean you up, a second con artist could be working on your wallet. Be the friend that sticks close to your wallet always. Written by our CFE to help you stay safe while abroad




Financial fraud is a serious danger for any corporate. According to the Banking Fraud Investigations Department (BFID), fraudsters stole US$9.4 Million from the banking industry between January and June 2014. This trend in corporate world is increasing in volume, methods and sophistication by the day, and anti-fraud professionals are playing catch up as more ways to defraud individuals, organizations and governments are invented by fraudsters each passing day.

Behaviorists and criminologists have spent plenty of time studying and evaluating the reasons behind crime and why people obey or break the law. There has never been a general consensus on this subject because of the subjective considerations involved. What is acceptable, however, is that to successfully recognize, detect and prevent fraud, every stakeholder has to learn a great deal about human beings and their behavior, both as individuals and groups. No science has been able to predict or shape behavior with pure accuracy because there are many factors at work in the network of actions.

Nevertheless, there has been general acceptance of the three basic factors or circumstances that must be present for occupational fraud to take place, commonly referred to as the Fraud Triangle. This framework has attempted to explain the nature of all occupational offenders and white collar criminals. These three factors, like a triangle come together to facilitate commission of fraud. They explain the reasoning behind a worker’s evaluation to commit a fraudulent action. The factors are;

  • Pressure on the individual’s financial position
  • A perceived opportunity to commit fraud
  • The ability to rationalize their actions.


Pressure on the Individual’s Financial Position

This is the main incentive for committing fraud, and it will be mostly a financial need. The pressure is seen by the individual as personal and secretive such that they may not ask for assistance from their peers who may be able to offer assistance. Generally, these problems threaten the status of the subjects, or threaten to prevent them from achieving a higher status than the one they occupied at the time of the fraud. Management employees have different motivation or ‘need’ to commit fraud when compared with non-management employees.

Non-management or lower lever employees may be motivated to commit fraud by;

  • High personal debt
  • The employee’s spouse lost a job.
  • The employee has many siblings who depend on him for upkeep or school fees.
  • The employee is paying medical expenses for an ailing parent/spouse.
  • The employee is divorced and has expensive child or spousal support payments.
  • The employee has a drug, alcohol, or gambling problem.
  • The employee is attempting to live a lifestyle more expensive than his salary can afford.
  • Peer pressure to match friends with high incomes
  • An overwhelming desire for personal gain.

Management and high cadre employees are motivated to commit fraud in a different way mainly because of the way they are compensated. The compensation packages of most organizations for the top level management employees are designed in such a way that the bulk of their remuneration is tied and dependent on company’s end year results and volumes. They are therefore likely to ‘cook’ the books to reflect a good performance so as to enhance their packages.

Sometimes the pressure could even be non-financial eg. Where someone has to cover poor performance and results to keep their job.

An opportunity to commit Fraud

Regardless of the strength of pressure or motivation, fraud can only take place if and when there is an accompanying opportunity. This is the means by which an employee abuses their position in order to defraud the organization. The perpetrator’s job defines the type of fraud they will commit. When employees have access to assets and information that allows them to both commit and conceal fraud, opportunity cycle is complete. This opportunity may present itself in one of the following forms;

  • Weak internal controls. A strong internal control system prevents fraud in addition to improving effectiveness and efficiency.
  • No separation of duties. For example where the same employee is responsible for bank deposits and preparing bank reconciliation.
  • Poor managerial checks and supervision. When management relents in its duty to perform checks and supervision, they put the organization’s finances in jeopardy. Attention to details must be key.
  • Lack of clear lines of authority and responsibility
  • No separation of custody of assets from the accounting of those assets.
  • A department that is not frequently viewed by internal auditors.
  • Placing too much trust in key employees.
  • Lack of proper procedures for authorization of transactions.

To avoid presenting opportunities for fraud, access must be limited to only those systems, information, and assets that are truly necessary for an employee to complete his or her job.



Rationalisation of the Fraudulent Action

This is the third and final factor in the fraud triangle, which involves the embezzler justifying their action. This is a necessary component since it is the component the fraudster considers to justify his misdeeds, well thought out even before the action is committed. One main mark of occupational fraud and abuse offenders is that once the action is committed, the act becomes more continuous. The fraudster sees himself not as a criminal, but as a victim of circumstance and therefore this appeals to his moral standing.

The most common rationalisations are;

  • I will refund the money.” This is the most common. The employee may have a genuine intention to refund the money after a while. However, more and more ‘borrowing’ increases the ‘soft loan’ to a point that it will not be possible to refund. At this point, the employee becomes careless and the situation escalates until they are eventually discovered.
  • “They are unfair to me.” When an employee feels aggrieved or short changed for some reason, they feel justified to also short change the employer through fraud, to settle scores.
  • “There’s no other way out.” This happens when the employee uses the money to pay for family needs, and feels he has no other way of managing his financial mess.
  • “Everyone does it anyway.” Where an employee feels or sees another employee in the same company doing the same, he considers fraud normal since others are doing it anyway.
  • “I am underpaid yet I work more.” Some employees’ rationale is usually that he works harder than the owner. In the employee’s eye, the owner is vastly overpaid, and, therefore, a little fraud on the part of the employee allows him his justifiable level of remuneration.


Whenever these three factors converge, fraud takes place. We all agree after considering the above that it may be impossible for the management to do anything about an employee’s personal pressures and even the rationalisations. However, the opportunity leg of the triangle is squarely in the hands of the management. If strong internal controls, management oversight, a well designed structure of system authorisations, separation of duties and clear lines of authority are in place, then the incidence of fraud is obliterated.


Written by our CFE and published in the SECURE DIGITAL MAGAZINE