The Statistical Profile of a Fraudster

GUEST BLOGGER

Andi McNeal, CFE, CPA
ACFE Director of Research

Accounting doesn’t happen in a vacuum. The performance, processing, reporting and analyzing of financial transactions inherently involves people. And people, by nature, make errors, have lapses in judgment, and — sometimes — break the rules intentionally.  

Although this point may seem self-evident, it’s a message that all too often gets forgotten amidst the check-the-box approaches and “it couldn’t happen here” mindsets that are common in many organizations. Thinking about the people behind the processes, transactions and numbers — and considering what might lead those people to succumb to the pressure, opportunity and rationalization to commit fraud — is critical to protecting an entity’s resources from dishonest employees.

As anti-fraud professionals know, individuals who perpetrate fraud look just like everyone else. They are our coworkers, our acquaintances, and even our friends and family members. Many appear outwardly honest and ethical, making it particularly difficult to suspect or believe that they would breach their employer’s trust. And yet, effectively preventing and detecting fraud requires us to do just that.

The ACFE's 2014 Report to the Nations on Occupational Fraud and Abuse provides some insight into the people behind the crimes. Of the perpetrators responsible for the 1,483 occupational fraud cases analyzed in our study:

• 42% were staff-level employees, and 36% were mid-level managers.
• 55% worked alone in committing their scheme.
• 52% were between the ages of 31 and 45.
• Two-thirds were male.
• 47% had worked for the victim organization for less than six years.
• 72% had at least some university education.
• 45% worked in the accounting, primary operations, or sales functions of the victim organization.
• 87% were first-time offenders with no criminal history of fraudulent behavior.
• 44% were known to be living beyond their means.

Obviously, simply meeting the profile outlined by the data above does not mean that an individual is going to commit fraud, nor should someone who falls outside the profile be immune from suspicion. However, examining trends in the characteristics of fraudsters can provide context and perspective to those charged with identifying high-risk areas and individuals.

With this in mind, the ACFE has created an infographic that illustrates the statistical profile of a fraudster to help inform anti-fraud professionals, management and the general public about some of our findings regarding occupational fraud perpetrators. This profile can be a valuable training and awareness tool, particularly when conveying the message that fraudsters don’t exhibit any sort of identifying hallmark — no special uniforms or badges, no “bad-guy” masks. The more we understand and help educate others about the human face of fraud, the better prepared we all are to prevent and detect fraudulent behavior.

Read more about the 2014 Report to the Nations at ACFE.com/RTTN.

The ACFE Needs You for its Biennial Global Fraud Study

PRESIDENT’S BLOG

James D. Ratley, CFE
ACFE President and CEO

There is rarely an event or seminar I attend that a fellow anti-fraud professional doesn’t share with me the value that the ACFE’s Report to the Nations on Occupational Fraud and Abuse recently provided to a certain case or investigation. This publication is one of the most, if not the most, popular resources we have the privilege of working on here at the ACFE.

The Report, now in its sixth edition, remains one of the most widely-quoted sources on white-collar crime statistics in the world. That is why we need your help to make the seventh edition, set to be released next year, as valuable as ever. We are asking all CFEs to take the 2011 Global Fraud Survey, a study that will serve as the foundation for the 2012 Report to the Nations.

After including statistics from CFEs all over the world last year, the Report’s significance has grown to include even more applicable statistics for fraud-fighters worldwide. The information contained in this Report is invaluable to those who seek to deter, detect, prevent or simply understand the global economic impact of occupational fraud.

Call it an early New Year’s resolution: contribute to the industry’s most insightful tool in the fight against fraud by sharing your expertise in the 2011 Global Fraud Survey. Also, to thank you for your time, you will receive two hours of CPE credit and the option to view an exclusive webinar with the survey results next year.

Tomorrow: The Only Line of Defense Against Fraud Existing Today

GUEST BLOGGER

Allan Bachman, CFE
ACFE Education Manager

Reports from far afield…continued

The Monday evening ACFE networking reception was a great success; featuring food, wine, Belgian beers and, of course, opportunities to network and socialize with attendees from all over Europe. After the event, many informally coalesced and went to dinner as a group.

After some coaxing, Jeffrey Robinson, renowned financial crime author and the Tuesday morning general session speaker, put in an appearance Monday night and held court with terrific stories and personal recollections which have made him the great author he is. He was still at it well after the reception had officially concluded.

ACFE President and CEO Jim Ratley spent a lot of time reminiscing with attendees who had met him at other conferences through the years. His presence this year was much appreciated, and Jim loves interacting with members in this way.

Tuesday morning’s session led off with Robinson, who spoke on, “The New Fraud.” He said early in his presentation, “If fraud were a disease, it would not be an epidemic, it would be a pandemic.” He went on to describe some major frauds around the world, how they were perpetrated, uncovered, investigated and the outcomes. He has written extensively on the topic of fraud. Throughout his presentation he referred to the ACFE’s 2010 Report to the Nations, quoting statistics in that report to support his claims about the ubiquity of fraud and what he thinks the 21^st century portends.

He made a case for hotlines, specifically mentioning EthicsLine, as a key component to what he called “Tomorrow,” an additional aspect of the fraud triangle which acts as a deterrent. “Tomorrow” is how you create the impression that fraudsters will be caught. He gave several humorous, actual cases of how creating the impression of getting caught, through simple inexpensive means, actually achieved that result.

Robinson closed saying that anti-fraud professionals like the ones in the room and the ACFE membership in general were the only line of defense against fraud existing today.

He was critical of how law enforcement, especially at the federal level, has turned away to focus on other crimes and what was once their forte has been largely ignored.

Robinson took a few questions and the audience left energized by a dynamic speaker with a lot of experience and great vignettes. Thanks to Jeffrey, and cheers to another great day in Brussels.

Year in Review: ACFE Publishes 2010 Report to Members

GUEST BLOGGER

Scott Patterson, ACFE Media Relations Specialist

The ACFE’s Report to Members is one of the publications I really enjoy working on every year. The Report to Members is unique because it is one of the few opportunities we have to look back, reflect on endeavors and successes, and works-in-progress. The theme of this year’s Report is “Leading the Profession: 2010 in Review,” which I find appropriate because the ACFE truly is the leader in fraud training and resources. Our membership grew by almost 10 percent in 2010, and we now have members in more than 150 countries, an amazing feat considering the difficult economic times.

What the Report is really about, though, is looking at the things the ACFE has done (and is doing) to support our members and remain in this position of leadership. The benefits we provide make joining the ACFE one of the best decisions an anti-fraud professional can make. The letter in the Report from our president and CEO, James D. Ratley, CFE, mentions many of these initiatives. The new Fraud Magazine website; an improved CFE Exam Prep Course®; online chat with member representatives; the new 2010 Report to the Nations on Occupational Fraud and Abuse and Compensation Guide for Anti-Fraud Professionals with international data; the largest and best annual fraud conference in the world; the list goes on. The Report also includes initiatives we are rolling out in 2011, such as the ACFE Advisory Council and an enhanced Career Center on ACFE.com.

Another great aspect of the Report is the ACFE member profiles we’ve included. Read about Ashley Busa, CFE, and Boyd Foster, CFE, and learn about their journeys to become professional fraud fighters. Also, one of the coolest new things about this year’s report is an embedded video interview with another CFE, Corey Costa. Corey sat down with us at the 21st ACFE Fraud Conference & Exhibition in Washington, D.C., last year to discuss how membership and the CFE credential have helped him along the way. Having his video interview available in the report truly adds a multimedia element to it.

I hope ACFE members enjoy reading the 2010 Report to Members as much as we enjoyed creating it. I’m already looking forward to next year’s edition.

Download the 2010 Report to Membershere.

ACFE Resolution #2: The Corporate Alliance Program

#2: LAUNCH THE ACFE CORPORATE ALLIANCE PROGRAM

In the latest issue of Fraud Magazine, the cover story, “Who Owns Fraud? Uniting Everyone to Effectively Manage the Anti-Fraud Program” emphasizes the old saying, “it takes a village.” The article suggests that management within a company must work together as a team to fight fraud effectively; with different functions playing different parts. It is with this same idea that we are launching the ACFE Corporate Alliance. We are currently running a pilot program with anti-fraud teams at USAA and Walmart, and will officially launch the program this spring.

The recent ACFE Report to the Nations estimates that the typical organization loses 5 percent of its annual revenue to fraud. Having anti-fraud experts like CFEs in a company can help reduce the impact of fraud. That is why we wanted to create an easy and beneficial way for companies to partner with the ACFE to educate and grow their fraud-fighting teams.

The new ACFE Corporate Alliance Program will help teams:

• Build a solid foundation of anti-fraud knowledge with group discounts on the CFE Exam Prep Course, the most effective tool available to help prepare for the CFE Exam.

• Stay up to date on the latest fraud news by receiving access to Fraud Magazine, e-newsletters and discussion forums.

• Receive exclusive training opportunities, as well as discounts on ACFE training, including live events, webinars and self-study courses.

• Get an extra level of personalized service including a dedicated liaison at the ACFE and free featured employer listings on the ACFE Job Board.

For more information about the Corporate Alliance Program, contact Lupe De Leon at ldeleon@acfe.com.

Stay tuned to ACFE Insights as we countdown to our No. 1 New Year’s Resolution tomorrow. Also, what are your professional New Year’s resolutions? Leave us your comments below.