By Christopher Sargent, CPA/ABV, AM
Senior Analyst, Valuation & Litigation Services
Email Chris
Even with a bevy of advanced security measures at our disposal, occupational fraud continues to ravage businesses across a wide range of industries.
Oftentimes, the best way to deal with a problem like this is to identify the patterns of its occurrence. To that end, the Association of Certified Fraud Examiners (ACFE) conducts an annual Global Fraud Study, which analyzes the patterns behind who commits occupational fraud and the financial damage they cause.
The most common category of occupational fraud in the 2024 study was asset misappropriation, occurring in 89% of cases. This involves such schemes as mischaracterized expenses, altered payees, multiple reimbursements, check tampering, etc. Corruption, which occurred in 48% of cases, consists of such illegal activity as bribery, invoice kickbacks and unauthorized gratuities. Financial statement fraud occurred in the least amount of cases (5%) but resulted in the highest median loss of $766,000. This entails net income overstatements or understatements, fictitious revenues, concealed liabilities and expenses, etc.
Based on this year’s study, occupational fraud is most often committed by perpetrators with the following demographics:
- Gender — Males accounted for 74% of total cases of occupational fraud.
- Age — Approximately 69% of perpetrators were between the ages of 31 and 50, but older fraudsters caused the highest median loss of $350,000.
- Education — Approximately 67% of perpetrators had a university degree or higher.
- Position of Perpetrator — Occupational fraud is committed most frequently by the employees and managers of a company, but owners/executives caused higher median losses.
- Employee — 37% of cases; median loss of $60,000
- Manager — 41% of cases; median loss of $184,000
- Owner/Executive — 19% of cases; median loss of $500,000
- Perpetrator’s tenure with the business — The longer an employee works for a company, the more trust they can build with their supervisors and co-workers — and the costlier their fraud.
- Less than 1 year — 9% of cases; median loss of $50,000
- 1-5 years — 45% of cases; median loss of $100,000
- 6-10 years — 23% of cases; median loss of $200,000
- More than 10 years — 23% of cases; median loss of $250,000
- Department within organization — Employees in the operations department generated the highest number of occupational fraud cases according to the study, followed closely by accounting and sales, respectively.
- Perpetrators with behavioral red flags — In 84% of cases from the study, perpetrators displayed at least one behavioral red flags before committing fraud, and multiple red flags were present in more than half of cases. Common warning signs included:
- Perpetrators living beyond known financial means
- Financial difficulties
- Unusually close relationship with a customer or vendor
- Unwillingness to share duties
- Defensive behavior
Please keep in mind these demographics are not indicative of an employee who will commit occupational fraud but are merely common demographics among occupational fraud perpetrators. It’s important to keep an eye on these common factors in order to identify potential issues in your own organization.
If you are concerned about occupational fraud in your organization, please call us at (317) 608-6699 or email Chris.