Executives and upper management account for more incidents
of expense reimbursement fraud than any other type of employee, according to a
new study from the Association of Certified Fraud Examiners.
Top executives account for about 24 percent of reimbursement
fraud, according to the survey of certified fraud examiners from 114 different countries who submitted to
ACFE details of 2,410 cases that they investigated between January 2014 and
October 2015. The finding is similar to that of ACFE's 2014 Global
Fraud Study.
"The correlation between authority and loss most likely
occurs because high-level fraudsters tend to have greater access to their
organizations' assets than lower-level employees, as well as a better ability
to evade or override anti-fraud controls," according to the report.
Accounting department employees were the second-most likely
category to commit expense reimbursement fraud, as they account for about 16
percent of incidents, according to the report.
Market Snapshot: Spain
A survey by Spanish travel and expense management startup
Captio revealed small and midsize enterprises experienced a higher incidence of
irregular expenses that could be considered fraudulent compared with larger
corporations. Captio surveyed 130 of its Spain-based corporate clients in 2015.
Companies with less than 50
employees had an annual average of £37,147 ($54,189) worth of irregular
expenses. Captio detected an annual average of £28,978 of potentially
fraudulent expenses for companies with 50 to 250 employees, compared with an
average of £22,304 for companies with more than 250 employees.
"We believe that a lack of
expense management tools and policies in SMEs is the reason why they are the
victims of a greater level of fraud," Captio co-founder and chief risk
officer Joaquim Segura said.
Asked why fraud occurred despite
the use of Captio's expense management tool, a spokesperson said eliminating
100 percent of fraud is "almost impossible," as there will always be
individuals who would "try to benefit from the weaknesses in the expense
reporting process."
As in past years, the biennial survey is "not intended
to gauge the absolute trends in overall occurrence of fraud," explained
ACFE director of research Andi McNeal. Instead, it is designed to examine
"the details of a sample of fraud cases during a particular period."
Global expense reimbursement fraud accounted for 14 percent
of all cases of "occupational fraud" reviewed by ACFE, and represented
a median loss of $40,000 per case. ACFE defined
occupational fraud as "the use of one's occupation for personal enrichment
through deliberate misuse or misapplication of the employing organization's
resources or assets." In the United States, expense reimbursement fraud
accounted for about 16 percent of the 1,038 U.S. fraud cases.
Expense reimbursement fraud was most common in the
technology sector, where it occurred in 27 percent of cases examined.
Reimbursement fraud appeared on 25 percent of cases in the religious charities
and social services sector, while manufacturing (22.9 percent), construction
(20.9 percent), and health care (20.1 percent) each experienced more than a 20
percent incidence of such fraud.
Small businesses, those with less than 100 employees, had a
higher incidence of expense reimbursement fraud (16.7 percent) than other firms
(13.9 percent). Small companies "not only incur losses as large as bigger
organizations, they typically have fewer resources with which to combat this
threat," according to the report. "The combination of these factors
leaves small businesses particularly vulnerable to occupational fraud."
Expense reimbursement fraud lasted a median of two years
before it was detected, according to the survey, which noted that "the
longer an occupational fraud scheme goes undetected, the greater losses tend to
be."
Offender Profile
Globally, men committed 69 percent of occupational fraud
incidences, while in the United States, men accounted for about 56 percent and
women about 44 percent.
The gender gap in fraud incidence might reflect the male-dominated
workforce—"we might expect [men] to commit a larger portion of
occupational frauds," according to the report—but it did not account for the
entire difference. Loss amount, fraud type, behavioral indicators and position
of power also played roles.
Men also were responsible for causing larger average fraud losses
($187,000) than women ($100,000).
According to the report, the older the fraudster, the more
expensive the fraud amount tended to be. "Fewer than 3 percent of frauds
were committed by people over the age of 60, but these cases had a median loss
of $360,000, which was much higher than any other age range."