Fraud can happen anywhere. But when it does, it can derail your organization. As discussed in our last article on the common ways that companies are defrauded, we noted that employees are among the most prevalent fraudsters. Whether that’s coming in the form of check tampering or corruption, everyone from your executives to your staff level accountants all the way to your suppliers may be responsible.

Today, we would like to look at the faces of fraud as presented by the Association for Certified Fraud Examiners, discussing who is most likely to commit fraud and the common behaviors of a fraudster.

Departments to Watch

Overall, 77% of the occupational frauds in our study came from eight departments: accounting, operations, sales, executive/upper management, customer service, administrative support, finance, and purchasing. But among these, accounting and operations lead the way.

If the books look a bit light, it’s always a good idea to look towards the people in charge of them. According to the Association for Certified Fraud Examiners, here are the most common sources of fraud within your own company.

Accounting: 14% of Cases, Median Loss of $212,000

Understandably, it’s never comfortable to look into your own department or assume that anyone you hired is responsible for fraud, but the accounting department is the most likely culprit.

These are the people who have the skills to hide it and are tied with operations at 14% of cases. However, when looking at the median loss, accounting fraud averages out to $212,000, third only to executive cases and information technology. 

A much different department than others, accountants methods include check and payment tampering, billing fraud, corruption, and skimming.

Operations: 14% of Cases, Median Loss of $88,000

Another department with access to information, materials, and the knowledge to maneuver, the operations department is another common culprit—though the average take is one of the lowest. For operations, corruption is the most common tactic, followed by noncash fraud, billing fraud, and cash on hand.

Sales: 12% of Cases, Median Loss of $90,000

Once again, a department with access to information, the sales department likely presents a different kind of risk than others. Sales leaders work with customers, and in turn have a lot of opportunities to pad an invoice, bribe someone, or take noncash incentives.

Executive/Upper Management/Ownership: 11% of Cases, Median Loss of $729,000

Though less common than others, when an executive commits fraud, they go big—with a median case loss of $729,000—often over the course of several years.

Corruption is the highest-risk activity among executives, but as a group with full access to everything, it’s not the only method they use. Billing fraud is common as well, followed by financial statement fraud and expense reimbursement falsification.

The Others: High-Risk, High Loss

Outside of the departments listed above, there are a variety of places to look. Customer service associates often are responsible for petty fraud, with an average loss of $26,000. 8% of cases are attributed to administrative support professionals, 6% to finance, and 5% to purchasing. However, finance and purchasing fraud is high cost as well—median cases total $156,000 and $163,000, respectively.

Various Demographics: Look for a College Educated Male Between 36 and 45

The report goes on to explore the common perpetrators and the demographics of these people, noting that nearly 7 out of ten perpetrators are male, due in part to men representing a higher percentage of executives. The study notes that male perpetrators are more likely as they become more authoritative,

“One possible reason that fraud losses caused by men are larger than those caused by women could be related to levels of authority. As shown in Figure 24 on pg. 33, fraudsters with high levels of authority (e.g., executives and owners) tend to cause much larger losses than those with low authority (e.g., rank-and-file employees).”

When looking at the age distribution, fraud cases follow a bell curve—middle management is going to be the most likely culprit. However, the study does note that the largest frauds are committed by the 56-60 age bracket.

Additional statistics:

  • 89% of culprits ere never charged or convicted of a crime.
  • 47% have a university degree.
  • Those with a postgraduate education have the highest median loss.

Common Behaviors of a Fraudster

So, now that they have your money, what are they doing? How are they acting? What other tells can you look for? Here are just a few of the red flags to look for when trying to identify your culprit:

  • Living beyond Means: 41%
  • Financial Difficulties: 29%
  • An Unusually close Relationship with Supplier or Customer: 20%
  • Control Issues/Unwillingness to Share Duties: 15%
  • Family Problems: 14%

Protect Your Coffers

Fraud can kill your organization—and anyone can be responsible. Though the aforementioned demographics and tactics can point you in the right direction, this is by no means the only way fraud happens. As a controller, it pays to remain vigilant and stay ahead of your responsibilities. We launched the Controllers Council to help you stay up to date with all the latest news and advice, offering not only tips for leadership, but networking and discussion opportunities as well. Get to know more about the benefits of joining.