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The Nature of Fraud

Are there perfect frauds that are never detected, or are all frauds eventually discovered? In addition many frauds that are detected are handled quietly by the victims and never made public. In many cases of employee fraud, for example, companies merely hide the frauds and quietly terminate of transfer perpetrators rather than make the frauds public. Companies and individuals who have been defrauded  are often more concerned  about the embarrassment of making frauds public and costs in investigating fraud they are about seeking justice and punishing fraud perpetrators.

Statistics on how  much fraud is occurring, whether it is increasing or decreasing and how much the average fraud  costs come from four basic  sources.

  1. Government agencies- Agencies such as the FBI, FDIC, IRS, or various  health  agencies publish fraud statistics are not complete are not collected randomly and do not provide a total picture even of all  the fraud in the areas for which they have responsibility.
  2. Researchers – Researchers often conduct studies about particular types of fraud in particular industrial sectors. Unfortunately, data an actual frauds are difficult to get and as a result most research studies only provide small insights into the magnitude of the problem even in the specific area being studied. Comprehensive research on the occurrence of fraud is rare and in a not always based on sound scientific approaches.
  3. Insurance companies- Insurance companies often provide fidelity bonding or other types of coverage against employee and other fraud. When fraud occurs they undertake investigation and, as a result, have collected some fraud statistics. Generally, however, their statistics relate only to actual  cases where they provided employee bonding or other insurance. At best their analysis of the problem is incomplete.
  4. Victims of fraud Sometimes we learn about fraud from those who have been victims. In almost all industries, there is no organized way for victims to report fraud and, even if there were many companies would choose not to make their fraud losses public.

THE ASSOCIATION OF CARTIFIED FRAUD EXAMINERS (ACFE)

(See figure 1.1 for a discussion  of the ACFE) regularly conducts on of the most comprehensive fraud studies in the U.S. First  conducted in 1996 and then redone 2002 and 2006 the ACFE study called.

Report to the Nation on Occupational Fraud Abuse. Is based on actual fraud cases reported by certified fraud examiners (CFEs) who investigated the frauds.

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