Fraud is one of the biggest concerns facing businesses in almost ever industry. Thieves are coming up with new and creative ways to cheat and steal companies and individuals out of their money and their identity. In businesses, fraud is a regular danger as it can ruin companies’ finances and reputations. The statistics of these frauds paint a picture that it will only get worse.
According to Embroker, a national program administrator when it comes to Fraud itself,
- 90% of fraud and theft is internal.(1)
- Cash theft is the top cause of theft in 20 percent of businesses.
- 60% would steal if they could get away from it
- 30 percent of thefts result in bankruptcies.
Cyber Fraud continues to be the biggest source of fraud hampering businesses through various malicious attacks. More troublesome, many thefts are caused by those who either work or have worked for the target company. According to the Department of Commerce and the Ponemon Institute, in 2020 alone, insider attacks cost on average over $11 million dollars and the costs are rising at a rate of 15 percent annually. Cybercrime is a regular concern, with many reports of bigger companies being hacked and extorted almost weekly. Private companies and smaller companies, so called low-hanging fruit are regular targets because they don’t invest as heavily into their controls as the big companies, so they are easier targets for fraud, internally and externally.
Demographically, fraudsters and theft tend to be younger and male. Most insider attacks are committed by those in their 20s and 30s, with 72 percent of attacks being caused by men. They primarily target the finance, insurance and healthcare sectors. Many of them, 84 percent, are looking for financial gain.(2)
From a financial standpoint, the losses are immense and rising. An estimated $50 Billion is lost to fraud annually, and that rate is increasing by 15 percent annually according to the US Department of Commerce. People estimate that 20 percent of all revenue by US Companies is lost to fraud, many of the targets being merchandise and cash. (3)
Finally, regarding who commits the crime in the company, many of the thieves are the people in power. Most fraud occurs in the upper management, accounting, or operations, the three departments that would have unfettered access to a company’s money. This makes it easier to hide their tracks, as an average fraud case lasting 14 months before they are discovered, most of the time being an internal tip. To solve this issue, many companies should limit who has access to their data and carefully monitor who does access the data.
Mike Smith, President and CEO of Axis Insurance Services LLC and former auditor with 2 separate Big 8 firms said. “What is always surprising to me is that they always get caught and more often than not, they have spent all the money they stole, leaving companies with little financial resources other than insurance. Often it is the least likely suspect and the one person that management trusted the most that commits the crime. Companies often don’t even report the crime since they don’t want the bad press associated with the lack of controls over the company’s money.
Fraud impacts everyone, from the government to private businesses. With billions lost every year, many people are understandably nervous about who or what they can be scammed off of. The fact that many cases of fraud occur internally should convince companies that this is a serious issue that must be taken seriously. Train your team to spot signs of fraud and do not punish them for retaliation as it could lead to further problems that may not be covered under your insurance policies.