Page 492 - ACFE Fraud Reports 2009_2020

The Cost of Occupational Fraud

Anti-fraud professionals, business managers, govern- of revenues each year. As one way to illustrate the mag-
ment and regulatory agencies, and the media each nitude of this estimate, applying this percentage to the
have a vested interest in assessing the total amount of 2014 estimated Gross World Product of $74.16 trillion re-
money lost to fraud each year. While many studies have sults in a projected potential total fraud loss of up to $3.7
3
attempted to determine the extent of fraud’s financial trillion worldwide. The limitation of this type of estimate
impact, the challenges in arriving at the true total cost of is that it is based solely on the opinions of our survey
fraud are numerous. It is impossible to know exactly how participants and not on any specific data about actual
much fraud goes undetected or unreported, and even fraud losses. However, the estimate comes from the
calculations based solely on known fraud cases are likely collective knowledge of thousands of CFEs who together
to be underestimated, as many victims downplay or mis- have tens of thousands of years’ experience in the
calculate the amount of damage. Nonetheless, attempts anti-fraud field. Given the impossibility of obtaining loss
to determine the cost of fraud are important, because data on all frauds, including those that are undetected or
understanding the size of the problem brings attention to unreported, this group likely has as much understand-
its impact, enables organizations to quantify their fraud ing about the harm fraud causes as any other resource
4
risk, and helps management make educated decisions available.
about investing in anti-fraud resources and programs.
The Fraud Costs We Know
Projecting Total Fraud Losses Based But the primary purpose of this study is not to make esti-
on Imperfect Data mates; our goal is to collect and report actual case data.
In terms of hard numbers, the total loss caused by the
To help measure the financial damage caused by fraud,
we asked the CFEs who participated in our study to
3 https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html (retrieved March
provide us with their best estimate, based on their 4, 2016)
experience, of what percentage of revenues the typical 4 This 5% estimate is further supported by Jim Gee and Mark Button’s report The Financial Cost
organization loses in a given year as a result of fraud. The of Fraud 2015 (www.pkf.com/media/31640/PKF-The-financial-cost-of-fraud-2015.pdf), which
reviews numerous fraud cost calculations computed by various organizations and arrives at an
median estimate was that fraud costs organizations 5% average fraud cost to organizations of 5.6%.

8 REPORT TO THE NATIONS ON OCCUPATIONAL FRAUD AND ABUSE