July 21st, 2016 | Sterling

Stat Check 2016: Occupational Fraud and Abuse

If you recently attended Bishops’ webinar in partnership with the Association of Certified Fraud Examiners (ACFE), you were confronted with some sobering statistics on occupational fraud, including who commits it and how. The information presented was based on findings from the ACFE’s 2016 Report to the Nations, which comprised a global study of more than 2,400 fraud cases.

The ACFE’s findings indicated that the fraudster’s level of authority has a strong correlation with the size of the fraud and the amount of damages the victim organization incurs. Additionally, the research revealed that the accounting department is one of the top internal sources where fraud originates. This underscores the importance of thoroughly and carefully screening key hires within your organization, and rescreening those key employees on a regular and ongoing basis as well.

As recently covered in the news, a woman with a history of financial crimes that occurred in various states was able to secure a job as an Office Manager and Bookkeeper for a North Carolina law firm, after a background check failed to pick up her earlier convictions, as they occurred while she was using a different name. This lapse in thorough screening resulted in the law firm experiencing a loss of more than $150,000. The employee ended up pleading guilty in June 2016 to one count of embezzlement and was sentenced to a prison term of 82-111 months. She will also be required to pay over $145,000 in restitution.

Not only could this bad hire have been prevented by a more thorough background check, but a yearly re-screen would likely have revealed that the employee was exhibiting other signs of fraudulent behavior, including her living beyond her means.

By establishing a strong pre-hire screening program and re-screening schedule, HR professionals can aid in creating a corporate environment that demonstrates proactivity in preventing and identifying fraud. Fraudsters feel most at home within organizations where anti-fraud controls are loose at best or nonexistent at worst.

Download the presentation here, or click here to view the ACFE’s Report to the Nations in its entirety.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.