Fraud Week 2015: What You Might Have Missed



Mandy Moody, CFE
ACFE Media Manager

The ACFE would like to thank all International Fraud Awareness Week Official Supporters, supporting media, bloggers, tweeters and posters for their amazing participation in Fraud Week last week. We would also like to thank our Featured Supporters this year: CRI Group, BNP Paribas, Mashreq, USAA, FGB and ADCB. The success of Fraud Week could not have happened without all of these dedicated people working together around the globe to spread the message that fraud can be prevented and detected.

Even with the many articles and resources shared, you might not have seen all that was done to highlight fraud detection and prevention. Here are some Fraud Week highlights you might have missed:

  • Video - Fraud: Yes, It Can Happen To Your Business
  • Video - Too Much Trust: How Fraud Happens Where You Least Expect It
  • Infographic - The True Cost of Fraud
  • Article - Know Where You Are Going: The Value of Interviewing Fraudsters
  • Article - Frontline Impact: 3 Practices For Creating Organizational Fraud Awareness
  • Article - Tackling Fraud in Higher Education: Universities Are Taking Up the Mantle of Fraud Prevention for Fraud Week

Remember, fraud awareness doesn't begin and end with Fraud Week. It is a year-round effort being supported by fraud examiners all over the world. Thank you all again, and we look forward to next year’s event!

Time is Truly Money When it Comes to Fraud



Sarah Hofmann
ACFE Public Relations Specialist

The estimated $3.7 trillion lost by organizations each year as a result of fraud is staggering. But not all frauds are equal; the length of time a fraud goes undetected can have a shocking impact on the amount lost. 

According to the ACFE’s 2014 Report to the Nations on Occupational Fraud and Abuse, the average organization lost a median of $130,000 per fraud instance. However, fraud that went undetected for 25-36 months rose to a median loss of $211,000, and only climbed further from there. Fraud that was allowed to continue for 61 months or more reached a whopping median loss of $965,000.

To detect fraud earlier, there are a number of controls that organizations can put in place.

Companies that provided an internal hotline for employees to report fraud saw that more than half of the frauds reported and caught were from a tip to the hotline. The median loss for companies utilizing a hotline was $100,000, which was a 40.5 percent reduction from the median loss of $168,000 for companies that did not utilize a hotline. Employing a hotline also cut the median duration of a fraud from two years to one year.

Regular account reconciliation
Frauds that were caught through regular account reconciliation averaged only $75,000 in loss and were usually caught 10 months after the fraudulent activity began. Account reconciliation is a good example of where separation of duties comes into play. If employees are individually reviewing the financial transactions approved by others, it quickly becomes clear when numbers don’t add up.

Providing fraud training for employees
Companies that offered fraud training for their employees saw a 39 percent decrease in their median loss per fraud incident compared to companies that did not train employees. Training employees to detect fraud also cut the time it took to detect fraud by 50 percent. Free and helpful resources to educate employees on fraud can be found at

International Fraud Awareness Week, November 15-21, is a great time to evaluate just how much time is potentially being wasted in organizations as fraud continues to happen undetected. By implementing a few of these easy controls, you can save your organization time and money.

Frontline Impact: 3 Practices For Creating Organizational Fraud Awareness


Katherine Peavy
Head of Program Management
Center for Responsible Enterprise And Trade (


Consider the fines in three recent Foreign Corrupt Practices Act (FCPA) cases:

  • In July 2014, gun-maker Smith & Wesson settled FCPA charges with the Securities and Exchange Commission (SEC), paying $2 million in fines and disgorgement.
  • In December 2014, the Bruker Corp. settled an FCPA enforcement action with the SEC for $2.4 million.
  • Also at the end of 2014, France’s Alstom S.A. pled guilty to corruption charges and was fined $772 million by the Department of Justice (DOJ).

While the fines in these cases are large, rarely is the frontline impact to employees, managers and shareholders discussed. At the very least, employees involved in the corrupt acts have their employment terminated. But often you see companies involved in FCPA cases laying off large numbers of employees, or even selling business units as Bruker and Alstom did. Additionally, stock prices take a hit, at least temporarily, when a DOJ or SEC case against a company is announced. For example, Smith & Wesson’s stock price in June 2014 reached $16.68 per share, but after the settlement announcement in July, it plummeted to nearly half that with a low of $9.54 per share in October.

Fines, investigative costs, legal fees and loss of employee, customer and shareholder trust all take a toll. At the Center for Responsible Enterprise And Trade (, our work on anti-corruption compliance programs with multinational corporations has highlighted areas where companies need to improve management processes and increase organizational awareness of anti-corruption compliance. It is precisely at the frontline with employees where companies need to invest resources in order to create the organizational awareness that will prevent fraud and protect jobs, profits and share prices. 

There are many steps companies can take to fully embed anti-corruption programs across an organization. As a starting point, below are three practices for improving organizational awareness around anti-corruption compliance from CREATe’s whitepaper, Why Anti-Corruption Programs Fail: Turning Policies into Practices.

  1. Engage Your Employees
    In both the Smith & Wesson and Bruker cases, the companies failed to engage employees in foreign offices sufficiently to communicate policies and procedures designed to prevent corruption. Engagement on anti-corruption management practices must go beyond translating Codes of Conduct and Statements of Ethics into local languages.

    A key success factor in engaging frontline employees in preventing corruption is communication by their own leadership. Germany’s Siemens implemented a process the company calls “Integrity Dialog,” in which managers discuss recent compliance matters with their teams. The dialogs serve the dual purpose of engaging employees and managers in discussions on anti-corruption compliance.
  2. Focused, Customized Training and Communications
    The DOJ’s press release announcing Alstom’s settlement of corruption charges noted that even after a previous corruption case, the company did not implement specific training and communications to set expectations for employees in preventing corruption.

    In complex global businesses, annual training on anti-corruption compliance often isn’t enough. Using more routine communications via onsite meetings by senior compliance leadership and the company intranet, and customizing training to the region, is critical to closing the gap in training and communications.
  3. Encourage Reporting and Questions
    The ACFE’s 2014 Report to the Nations on Occupational Fraud and Abuse notes that in detecting corruption:

    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.

    Indeed, most of the high profile corporate fraud cases of the past 20 years, from Enron to Madoff, were uncovered due to courageous whistleblowers alerting the company, the government or the public to the situation.

    For the whitepaper Why Anti-Corruption Programs Fail, CREATe interviewed a number of compliance executives who stated that a critical tool in their compliance programs is encouraging reporting and questions. Actions include offering incentives such as an annual Chairman’s award to whistleblowers and employees who have stood up for anti-corruption compliance in the organization. Some of the same compliance executives state that they also hold one-on-one meetings with employees in different offices to emphasize company support for reporting and questions on corruption prevention.

In CREATe’s work with the employees and suppliers of global organizations, cascading management systems that include policies and procedures to prevent corruption is key to a company’s success with its anti-corruption compliance program. Engaging employees, focused and customized training, and encouraging reporting and questions leads to frontline organizational awareness of the management systems and business processes that are critical to detecting and deterring fraud and corruption.

Katherine Peavy is head of program management for the Center for Responsible Enterprise And Trade (, a non-governmental organization dedicated to helping companies around the globe prevent piracy, counterfeiting, trade secret theft and corruption. She is a global compliance executive with more than 15 years' experience in China managing multicultural teams to implement compliance programs and complete corruption investigations, most recently for Wal-Mart.