You have probably heard that the best defense is a good offense. That is true in many sports, and it is true in fraud prevention, as well. You cannot protect your business from fraud if you don’t know what fraud “looks like.” Fraud occurs in Florida and every other state in the nation. Although the specific details vary from one industry to the next and from one business to another, there are significant commonalities among fraudsters that you need to know in order to spot signs of potential fraud before it destroys your business and your reputation.
For example, according to the Association of Certified Fraud Examiners 2010 Report to the Nations, gender makes a difference. In every reporting region, males perpetrated occupational fraud more frequently than females – 57.2% of occupational fraud committed by males and 42.8% by females.1 And although the frequency of fraud by male and female perpetrators is the same in the position of employee, the rate of fraud by males is “higher” than that of females in the position of manager and “much higher” for owners/executives. Males trump females in the amount of financial loss of fraud, too, with male-perpetrated fraud averaging $232,000 per scheme and female-perpetrated fraud averaging $100,000. Does this mean that you should be suspicious of every male employee and officer in your business?
Additionally, there is a strong correlation between the perpetrator’s position of authority and the losses caused by fraud. The median loss in owner/executive fraud was $723,000, more than three times the loss caused by managers ($200,000) and more than nine times the loss from employee fraud ($80,000). The higher the fraudster’s position of authority, the longer it takes to detect the fraud. The median months to detection were 13 for employees, 18 for managers, and 24 for owners/executives.
Age is also a factor in occupational fraud. More than half of all reported cases were committed by individuals between the ages of 31 and 45. However, the highest median loss based on age is 60+ at $974,000.
Tenure often correlates with age and position, and it correlates with fraud, as well. More than 40% of perpetrators had between one and five years of experience with their victim businesses, and about half of all fraudsters had been with the victim for more than five years. Not surprisingly, employees who had more than five years of tenure with the victim organization were able to do the most damage, causing median losses of more than $200,000.
One of the things fraudsters do so well is exploit their victims’ denial. It is difficult to believe that a long-term, trusted employee could defraud you, especially if they are believed to be law- abiding citizens. Well, guess what? 86% of fraud perpetrators had never been charged with, or convicted of, a prior offense. 86% were believed to be law-abiding citizens, and yet, they stole hundreds of thousands of dollars from their employers.
The price of denial is too high. Fraud could happen to you. Complete Legal Investigations can help you assess your fraud risk and implement a protection strategy. Don’t leave your business to chance. Contact Complete Legal Investigations today at 561-687-8381.