Page 584 - ACFE Fraud Reports 2009_2020

THE COST OF Accordingly, providing a measure of the cost of fraud
OCCUPATIONAL
FRAUD
How much money do
organizations lose as a
result of fraud?
Anti-fraud professionals know just
how devastating a fraud can be to
its victims. But they are not the only
ones who benefit from insight into
the amount of damage that fraud
causes organizations and their stake-
holders. Business leaders need to
understand how much is at stake
as they assess their risks and make
resource-allocation decisions. Reg-
ulators need to determine where to
focus their enforcement efforts. In-
vestors and customers need to make
informed decisions about where
to direct their own money. And the
media desires context and direction
for helping to raise awareness of the
issue to the general public.
8 The Cost of Occupational Fraud Report to the Nations
is an incredibly important endeavor. It is also an
incredibly difficult one, given the number of unknown
factors required to make such an estimate. No one
knows the amount of frauds that go undetected or
unreported, and even for those frauds that do come to
light, the full amount of loss might never be calculated.
Such limitations mean that any attempts to quantify
the global amount of fraud will be imperfect.
Projecting Total Fraud Losses
Based on Imperfect Data
Even with these limitations on projecting the total
amounts lost to fraud, however, we know that such a
projection has an important place in the fight against
fraud. Consequently, we asked survey participants,
based on their professional experience, what per-
centage of revenues they believe a typical organiza-
tion loses to fraud each year. The median response
provided by these CFEs is that organizations lose 5%
of their annual revenues to fraud. While this number
is only a general estimate based on the opinions of
the CFEs who took part in our study, it represents the
collective observations of more than 2,000 anti-fraud
experts who together have investigated hundreds
of thousands of fraud cases. To place their estimate
in context, if the 5% loss estimate were applied to
the 2017 estimated Gross World Product of USD
79.6 trillion, it would result in a projected total global
fraud loss of nearly USD 4 trillion. To be clear, this
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number is only an estimate and, given the limitations
described above, it is unlikely we will ever be able
to calculate the true cost of fraud on a global scale.
But we can be certain that the amount of damage is
incredibly large, and this estimate, provided by an-
ti-fraud professionals who work to prevent and detect
fraud on a daily basis, helps give us some insight into
just how big the problem may be.
The Fraud Costs We Know
Determining total fraud losses—whether globally, re-
gionally, by industry, or even within a specific organiza-
tion—is outside the primary scope of our study. Instead,
we focus on analyzing known data to better under-
See https://www.cia.gov/library/publications/the-world-factbook/geos/
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xx.html (retrieved March 22, 2018).