Author: Jaclyn Veno, CPA
This article originally appeared in the Summer 2024 issue of the South Carolina CPA Report

Occupational fraud poses a significant risk to organizations of all sizes and industries. The Association of Certified Fraud Examiners (ACFE) estimates that occupational fraud leads to a loss of 5% of annual revenue, amounting to over $5 trillion globally when applied to the Gross World Product. The ACFE’s Report to the Nations is the largest global study on occupational fraud. The ACFE’s 2024 report reveals significant insights from 1,921 cases of occupational fraud, totaling over $3.1 billion in losses, with 22% of cases exceeding $1 million each.

While there are many steady trends within the report, such as the most common fraud detection method being a tip and the most common behavioral red flag from a perpetrator being living beyond their means, there are newer trends in this year’s report that are fascinating to study. For instance, this report includes a new calculation on the velocity of fraud schemes, emerging trends in cryptocurrency fraud, and statistics resulting from the aftermath of the COVID-19 pandemic.

Velocity of Fraud
A new trend included in the 2024 Report to the Nations is a velocity calculation. The ACFE calculated the velocity of fraud cases reported by taking the total loss of the fraud divided by the number of months the fraud lasted. This calculation was done to measure the impact of different types of fraud over similar time periods. First, a separate velocity calculation was done for each type of fraud scheme (i.e., financial statement fraud, cash larceny, skimming, etc.). Once the separate calculations were complete, the ACFE calculated the total overall velocity, or loss amount per month, for all cases. The overall velocity of cases was $9,900.

However, certain types of occupational fraud compound much more quickly than others, with financial statement fraud ($42,000) and corruption schemes ($15,400) having the greatest velocities. The asset misappropriation schemes with the highest velocities are check and payment tampering ($8,600), billing schemes ($5,600), and noncash schemes ($5,500), such as theft of inventory.

Similarly, cases involving collusion between two or more perpetrators and cases perpetrated by individuals at higher levels of authority have higher velocities, inflicting financial damage to the victim organization more quickly. For instance, the velocity of a fraud scheme with only one perpetrator is $6,300 loss per month, but the velocity of a scheme with two perpetrators is $11,300 loss per month. Not surprisingly, the velocity of a lower-level employee perpetrating fraud is $7,500, but it dramatically increases if the fraud is being instigated by an owner/executive ($20,800).

COVID-19
There are numerous statistics in the ACFE Report this year resulting from the COVID-19 pandemic. Since the fraud cases that were investigated in the 2024 report were between January 2022 and September 2023, and the typical case of occupational fraud lasts 12 months before being detected, many cases studied likely occurred during the pandemic.

According to the report, more than half of the 1,921 cases studied had at least one pandemic-related factor contributing to the occurrence of fraud, such as:

  • Shift to remote work
  • Organizational staffing changes
  • Operational process changes
  • Internal control changes
  • Changes to strategic priorities
  • Changes to anti-fraud program
  • Supply chain disruptions
  • Technology challenges

After seeing a decline in fraud losses over several previous studies, the median loss of frauds that occurred during the pandemic were 24% greater than pre-pandemic levels. In the 2022 Report to the Nations, the median losses resulting from financial statement fraud were $593,000, and in 2024 the median rose to $766,000. Similarly, the median for corruption-related losses was $150,000 in 2022 but rose to $200,000 in 2024. And lastly, median asset misappropriation losses increased by 20%, rising from $100,000 to $120,000. The ACFE firmly believes these increases in fraud resulted from the pandemic.

Cryptocurrency
According to the 2024 ACFE’s Report to the Nations, there were some interesting new trends concerning cryptocurrency. As a result of the increased prevalence of cryptocurrency across many organizations, new trends in occupational fraud have come to light. Although only 4% of the 1,921 cases in this study involved cryptocurrency, there was still some commonality among these cases. Nearly half of those cases involved the perpetrator converting their stolen assets into cryptocurrency, and one-third involved bribery or kickback payments made to a co-conspirator in cryptocurrency.

Other schemes include the misappropriation of organizational cryptocurrency assets, proceeds of fraud laundered using cryptocurrency, and the manipulation of reported cryptocurrency assets on the financial statements. As cryptocurrency continues to get more popular, it will be interesting to see how these statistics evolve over time in subsequent reports.

In conclusion, the ACFE Report to the Nations not only reinforces the consistency of many fraud trends, such as the importance of internal controls, behavioral red flags of perpetrators, and the breakdown of the most common cases of occupational fraud; it also incorporates new trends in the current global economy. This report is a great resource for all organizations, and it is important to stay up to date on these trends to hopefully prevent and detect fraud.