Usually fraudsters do not stand apart from the other employees of the same organization in terms of demographics or physiologic profile. The personal profile of most perpetrators is similar to that of an honest individual so this is why, once the fraud is detected, victims and colleagues are usually surprised by the unethical conduct of the unfaithful employee.

As already mentioned, fraudster are usually pushed to fraud by a feeling of pressure or discomfort (either professional or coming from other sources) coupled with the existence of a favourable scenario (opportunity) and a self-justification of their conducts (rationalization).

The ACFE ‘Report to the Nations 2018’ survey has profiled fraudsters, extrapolating information from their conditions of employment, basic demographics, prior misconducts and behaviours htat might have been warning signs of fraudulent activity.

The goal of that section of the survey was to provide a range of information about the common characteristics and conducts for those who commit occupational frauds to help organizations better and promptly recognize any potential fraudulent activity. 

Level of authority

The survey shows the correlation between the level of authority of the perpetrator and the size of the fraud. Indeed, while business owners/top executives committed a fraud in only 19% of cases – against a 78% for other employees – the median losses inflicted to the relevant organization  accounted for approximately $ 850,000,six times the size of the losses suffered in case of frauds perpetrated by low-level personnel.

This correlation reflects the fact that, as a general rule, top executives hatch fraudulent schemes that generate greater losses, because they have greater access to the assets and resources of the organization, greater technical abilities and knowledge to conceal the effects of the frauds and might be able to use their authority to override controls.

How does the level of authority of the perpetrators relate to fraud duration? (Employee: 12 months, Manager: 18 months, Owner/executive: 24 months)

Tenure

It results that the perpetrator’s tenure affects the duration and size of frauds. Indeed in most cases – approx. 44% – frauds have been committed by personnel working in the organization from 1 to 5 years. The most significant impact in terms of losses is that of frauds committed by personnel with more than 10 years’ experience (approx. 24% of cases) causing a median loss of approx. $ 241.000. 

One possible explanation for the correlation between tenure and fraud might be that employees who have been working for the organization for long are often promoted to positions of greater authority and are more privy to the controls that are present in the organization.  

Department

The survey also sheds a light on perpetrator’s department highlighting, for each department, the percentage of cases and the median loss suffered.

Perpetrator’s department, percentage of cases and median loss suffered for each department

The following chart shows the most common fraud schemes for each department. Boxes are shaded from light to dark red based on the frequency of each fraud type. Darker boxes indicate higher level of risks. This information may be useful to assess the risk or implement suitable and appropriate controls in the departments most likely to be occupational fraud hotspots.

Most common fraud schemes for each department

[source: ACFE, Reports to the Nations 2018]

The chart above shows how corruption is the most common scheme in the executive/upper management and purchasing departments.

Age

According to the survey, most perpetrators (approx. 38%) are aged between 36 and 45, but most losses are caused by individuals aged between 56 and 60 (approx. $ 480.000).

Also in this case, one possible explanation is that top management positions – therefore those granting an easier access to the assets and resources of the organization – are usually covered by people aged 50 or more.

Educational level

The survey shows that an additional element further affecting the frequency of cases and the size of losses is the educational level. Indeed, most fraud cases involve people with a university  degree (approx. 47%), but most losses relate to fraudulent schemes committed by people with postgraduate degrees, therefore with a high educational level $ 230,000). Also in this case, usually fraud schemes involve top managers and executives, being the professional positions requiring greater specialization and higher qualifications.

Collusion by multiple perpetrators

Approx. 49% of cases involved frauds committed by two or more employees as reported in the picture below.

Approx. 49% of cases involved frauds committed by two or more employees

[source: ACFE, Report to Nations 2018]

One possible explanation is that several anti-fraud controls are based on the separation of duties and controls. More than one employee conspiring in a fraudulent scheme can circumvent the controls that might otherwise detect the fraud.

Background

The survey highlights that most fraudsters (approx. 89%) were at their first criminal experience. This information might be flawed by the fact that, in many cases, frauds are not reported to the authorities and that, often, victim organizations enter into private amicable settlements with the perpetrator, which are confidential.

Moreover the survey highlights that 85% of fraudsters have never been sanctioned or dismissed as a result of fraud-related conducts. This information might be flawed for the reasons explained above.

Behavioural red-flags

Finally the survey demonstrates that there are some behavioural red flags that might alert an organization and lead to a thorough review of the conduct of an employee. For example:

  • living beyond means;
  • financial difficulties;
  • unusually close relationships with a customer or a supplier;
  • excessive control issues or unwillingness to share duties;
  • family problems;
  • being ruthless.