As your founder and chairman, it is with both sadness and joy that I am advising you of President James D. Ratley’s retirement next month on his 30th anniversary with the Association of Certified Fraud Examiners (ACFE). Thousands of you have met Jim; he has given countless presentations at events and local chapters while logging millions of miles on several continents.Read More
ACFE Content Manager
I can't even begin to describe the amount of International Fraud Awareness Week activity we have seen on social media this year. I guess that was my way of beginning to describe the amount of activity we saw. With more than 10 million impressions on Twitter and numerous infographics and blog posts, this year's reach has surpassed previous years by millions.
So, I am left with two tiny words to express the overwhelming sense of support you have all spread over the last five days. Thank you. Thank you to the individuals creating one-page documents. Thank you to the organizations officially supporting the cause. And, thank you to the many people who came together from different industries to host events.
Here are just a few of the resources I caught this week that I hope you can use in your own efforts moving forward:
- Identity Fraud Prevention Playbook (LexisNexis)
- 7 Surprising Ways to Create an Information Security Culture (ShredIt)
- Infographic! Spear-Fishing Attacks: One Click Can Change Everything (Symantec)
- Interactive Data Analytics Tests (ACFE and EY)
Again, thank you to everyone that participated in Fraud Week this year. There are so many more resources than the ones I highlighted above, so take some time and search for #FraudWeek on Twitter and Facebook. We will meet again in 2017!
John Warren, J.D., CFE
ACFE VP and General Counsel
It may be better and cheaper to prevent fraud than detect it, but it’s a fact of life in any organization that fraud will eventually happen. The tools we use to detect fraud are critically important. Data from the ACFE’s recent 2014 Report to the Nations on Occupational Fraud and Abuse suggest that organizations that proactively seek out fraud do a much better job of limiting their losses; whereas those who are reactive – relying on external or passive detection methods – tend to experience much larger fraud costs.
For those not familiar with the Report to the Nations, it is a bi-annual study based on actual cases of occupational fraud, with detailed information supplied by the Certified Fraud Examiners (CFEs) who investigated those cases. The 2014 Report contains data from 1,483 frauds that occurred in more than 100 countries.
We identified 18 common anti-fraud controls and asked our respondents which, if any, of these controls had been implemented by the victim organizations at the time their frauds occurred. We then compared the median loss and median duration of frauds based on whether each control was or was not present.
What we found was that every control was associated with a significant reduction in median losses, ranging from 20% to 60% per scheme. Each control was also associated with faster fraud detection. (For a full list of our results, see page 38 of the Report.) This analysis is not a perfect measure of control effectiveness – remember, we’re looking only at frauds that have occurred, so we’re not able to measure the preventative impact of controls. But our data strongly suggests that anti-fraud controls have a measurable impact in reducing fraud losses.
The control that scored the highest in our 2014 study was “proactive data monitoring and analysis.” Organizations that utilized proactive data monitoring experienced frauds with a median loss 60% lower than those without this tool, and they detected fraud 50% more quickly. Unfortunately, only a little more than one third of the victim organizations in our study conducted proactive data monitoring for fraud. This low implementation rate may be a factor of cost. A typical small business may not have the financial resources or personnel necessary to conduct proactive monitoring. When we focused on larger organizations (those with 10,000 or more employees) we found a stronger implementation rate of 49%, but that still means half of the largest, most well-financed organizations were ignoring this tool.
In the 2014 Report we’ve included a wealth of information about how frauds are committed, the highest risk areas for various departments and industries, and the characteristics of those who commit these crimes. We encourage readers to use this information to help determine where their organizations are most vulnerable to fraud, and then use the data we’ve gathered on controls and detection to design systems that will give them the best chance of catching these crimes early and limiting fraud losses.
Find more details and read more Report findings at ACFE.com/RTTN.
Scott Patterson, CFE
ACFE Senior Media Specialist
Small businesses (those with fewer than 100 employees) still bear the brunt of fraud’s damaging effects. They are more often the victims of fraud cases than larger organizations, and their financial losses are disproportionately high. Another fraud fact: two out of three perpetrators are men, a persisting gender gap that shows no sign of closing.
These and other insights are detailed in the ACFE’s newly published 2014 Report to the Nations on Occupational Fraud and Abuse. The Report is based on data compiled from a study of 1,483 cases of occupational fraud that occurred worldwide between January 2012 and December 2013. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases in our study came from nearly 100 nations, providing a truly global view into the plague of occupational fraud.
A few of the other findings in the 80-page Report:
- Fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the study was $145,000. More than one-fifth of these cases caused losses of at least $1 million.
- Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.
- Tips are key in detecting fraud. Occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.
- Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.
Since the inception of the Report in 1996 (originally titled The Wells Report), the ACFE has released seven updated editions — in 2002, 2004, 2006, 2008, 2010, 2012, and the current version in 2014. Like the first Report, each subsequent edition has been based on detailed case information provided by Certified Fraud Examiners (CFEs).
With each new edition of the Report, the ACFE adds to and modifies survey questions in order to enhance the quality of the data. This evolution of the Report to the Nations provides a more meaningful statistical picture drawn from the experiences of CFEs and the frauds they encounter.
Download the Report at ACFE.com/RTTN on May 20.
ACFE Partnership Manager – Asia-Pacific Region
Last month, the Malaysian Anti-Corruption Commission (MACC) announced its plans to collaborate with the Association of Certified Fraud Examiners (ACFE) by joining the Law Enforcement and Government Partnership (LEGP) and certifying more than 400 MACC investigations officers with the CFE credential.
"To improve the knowledge and skills of our investigation officers in the operations section, in detecting corrupt practices, we will be cooperating with the ACFE," said MACC chief commissioner, Tan Sri Abu Kassim Mohamed. He said corruption did not only involve accepting or giving bribes in the form of cash, but also covered other forms like fraudulent managing of accounts, which was difficult to detect roughly. "With such an accreditation program [the Certified Fraud Examiner credential], our investigation officers will be able to enhance their capability in identifying corrupt practices including wrongdoings related to taxes and claims."
In the article, “MACC Seeks to be on Par with FBI” in the New Straits Times, MACC special adviser to the chief commissioner and head of forensics Datuk I.G. Chandran said the program was part of MACC's effort to move from witness-based probes to document-based probes. "As cases become more complex, we can no longer rely on witness statements. We need to have an understanding of financial documents to find evidence of graft, which can be well-hidden."
As the newly appointed Asia-Pacific Partnership Manager for the ACFE, I had the pleasure of sitting alongside Abu Kassim in Kuala Lumpur as he made his announcement at a press conference held at the International Internal Auditor’s Malaysia Corporate Fraud Conference. This type of partnership is something I am excited to be a part of and I hope to see more Asian law enforcement and government agencies step up to provide first-rate anti-fraud training to key staff in the future.
Although I have some background in auditing, I am understanding more and more about the fight against fraud. Last month, I also attended the Association of Certified Anti-Money Laundering Specialists' Asia-Pacific conference in Kuala Lumpur. I met with attendees of all different levels. It was interesting to hear from many about what they thought of the ACFE. To my surprise, not only were attendees familiar with the ACFE, they expressed how it is a well-respected professional organisation. Our recent event in Singapore, “Using Data Analytics to Detect Fraud,” was our largest 2-day course held outside of the U.S. with more than 90 participants, half of whom were not previously members of the ACFE.
To expand its international presence, the ACFE has come up with a variety of resources and events for members outside the U.S., which is constantly being reviewed and enhanced. For 2014, the ACFE has put together six 2-day seminars in Hong Kong, Australia, New Zealand, Singapore, Malaysia and Indonesia, as well as the 2014 ACFE Asia-Pacific Fraud Conference in Hong Kong this November. Due to the success of the courses held in the first part of the year, we are already planning more events in the region for 2015. These are just a few things which the ACFE is currently doing to support the growth in the region (and don’t forget they hired me as its Partnership Manager).