Crime

Automotive Risk Management
& Insurance Services, Inc.

Crime - Occupational Fraud and Abuse

In a report released by The Association of Certified Fraud Examiners titled Report to the Nation on Occupational Fraud and Abuse, the organization found that in the United States :

Organizations lose 6 percent of annual revenue to fraud and abuse.

Fraud and abuse costs U.S. organizations more than $400 billion annually.

The average organization loses more than $9 a day per employee to fraud and abuse.

Asset misappropriation accounted for more than four out of five offenses.

Bribery and corruption constituted about 10 percent of offenses.

There is a direct correlation between the employee's age, sex, and position and the median loss due to fraud and abuse. The data revealed that the most predictive variable concerning the amount lost was the perpetrator's position in the organization. As a general rule, men and older employees occupy higher positions and therefore have greater access to assets.

Smaller organizations are the most vulnerable to occupational fraud and abuse. Organizations with 100 or fewer employees suffered the largest median losses per capita. Generally this is because sophisticated internal controls, designed to deter occupational fraud, are less prevalent in smaller organizations.

A lack of understanding of the nature of occupational fraud and abuse adds to its cost.

Relatively few occupational fraud and abuse offenses are discovered through routine audits. Most fraud is uncovered as a result of tips and complaints from other employees.

The expansion of computers in organizations likely will increase losses due to occupational fraud and abuse. The use of computers in business has drastically changed the speed with which financial transactions can be accomplished. In addition, computers often do not create the documents necessary to easily detect fraud and abuse. Many experts see increasing reliance on computers as a likely cause of additional offenses. However, computers are also being employed to detect fraud and abuse.

The rate of occupational fraud and abuse likely will rise. Occupational fraud and abuse is caused by many complex sociological factors. Individual and corporate morality are difficult to quantify. Among other things, increasing demands on the criminal justice system by violent criminals may make fraud and abuse prosecutions more difficult. Additional proactive vigilance and education, however, as well as consumer action, could stem future increases in occupational fraud and abuse.

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Automotive Risk Management & Insurance Services, Inc.
2087 Grand Canal Blvd., Suite 12, Stockton, CA 95207.
Mailing Address: P.O. Box 70334 Stockton, CA 95267.
Phone: (209) 473-8937, Fax: (209) 472-8692, e-mail:mmcdougal@armonline.com
California Insurance License No. OB89379