Insider fraud cost firms as much as $3.5 trillion in 2011

The smallest organizations are the most vulnerable to occupational fraud, according to a new study from the Association of Certified Fraud Examiners (ACFE).

The 2012 Report to the Nations on Occupational Fraud and Abuse shows the typical organization loses about five per cent of its revenue to fraud each year, or a potential projected loss of $3.5 trillion worldwide in 2011. But because small firms invest in fewer anti-fraud controls that larger enterprises, they are less likely to catch fraud before damage is done.

Occupational fraud is defined as the use of one’s employment for personal benefit through the deliberate misuse or misappropriation of resources or assets of the employing organization. The most popularized example of this type of fraud was likely in the 1999 movie Office Space, serving as a main plot device when employees scam their company by skimming fractions of a penny off each financial transaction into a personal account.

The ACFE’s report includes specific details about fraud in Canada’s workplace.

In Canada, tips were still the most common method for detecting fraud, but not as high as in other regions – 38.6 per cent were detected by tips compared to 43.3 per cent across all regions. Using surveillance and monitoring was a more successful method to detect fraud in Canada, with 5.3 per cent compared to 1.9 per cent worldwide.

The study looked at 1,388 cases of occupation fraud from 96 countries and 58 cases from Canada. The average loss to fraud in Canada was $87,000, which is lower than any other region. The United States lost the most on average, at $120,000, and Latin America and the Caribbean lost the most at $325,000.

Employees position were the most likely to commit fraud in Canada, accounting for 58.2 per cent of 55 cases. But when managers committed fraud (27.3 per cent of the time), they did more damage on average at $143,000.

This is the sixth such report from the anti-fraud organization since 1996.

Brian JacksonBrian Jackson is the Associate Editor at ITBusiness.ca. E-mail him at bjackson@itbusiness.ca, follow him on Twitter, connect on , read his blog, and check out the IT Business Facebook Page.

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