Fraud is an on-going concern for companies of all types and sizes. Certain industries are susceptible to different types of fraud, and can be affected in different ways based on the frequency and size of each fraud occurrence. For example, a company in the banking or financial services industry may experience a multi-million dollar fraud once every few years, where a company in the retail industry may experience fraud occurring on a daily basis. Companies in the retail industry use multiple third-party vendors in the manufacturing and distribution channels which opens up the door to various types of fraud at different points before the product arrives on the shelves.
The 2014 ACFE Report to the Nations estimates that the “typical organization loses 5% of revenues each year to fraud”, in which 22% of cases lose at least $1 million. This study also shows that the type of fraud does in fact differ between industries and locations, but one prevailing factor that differentiates the impact of the fraud is the size of the company. When the number of employees, locations, and revenue is high, the amount and prevalence of fraud is also high. However, small companies experience a proportionally higher negative impact when a fraud has occurred. The Report to the Nations also classifies occupational fraud into three main categories: asset misappropriations, corruption, and financial statement fraud; of which asset misappropriations are the most common, occurring in 85% of the companies the ACFE studied. In our experience, over half of these fraud occurrences are brought to attention by an employee “tip”, more commonly known as a whistleblower.
Our managing partner, Eric Stephens, was asked in an interview whether or not certain locations are different than others in corporate crime, he responded:
“…money amounts differ, however the subject matter is usually repetitive. Employee embezzlement, credit card fraud, money laundering. It really is across the board. One matter we experienced in recent years was a small town business, privately held, two partners involved. The partner responsible for accounting had stolen approximately $163,000 from the business, of which she owned 50 percent.”
It is important to understand that even though the type and frequency of fraud differs between industries and locations, no industry is impervious to the risk and prevalence of fraud.
If you have questions about how we would handle a particular situation, please call me at 612.455.4555 or visit our website at www.intellexforensics.com.