Facts on Fraud

Westminster offers services to help meet the tremendous global need for qualified and experienced forensic accountants and fraud investigators in the detection and prevention of fraud. While government agencies in the United States such as the FBI, ATF, and IRS employ forensic accounting professionals, such resources are severely limited within the private sector. Even in the public sector, these government agencies often do not have adequate human resources to effectively combat the pervasiveness of fraudulent activities throughout the nation and rely on companies such as ours to supplement their work force.

These are just a few of the numerous examples of fraud losses globally. It is clear that the total actual losses due to fraud is staggering and has a direct impact on the national and global economy.

According to the ACFE's Report to the Nations on Occupational Fraud & Abuse, the typical organization loses 5% of its annual revenue to fraud. Applied to the estimated 2009 Gross World Product, this figure translates to a potential total fraud loss of more than $2.9 trillion. Statistics show that 60% of private businesses report some form of fraudulent activity within their companies. Customer theft, employee theft and various fraud schemes rob American businesses of approximately 7 % annually. Presently, there is a great demand globally for professional services in the area of fraud investigation and forensic accounting, specifically white-collar crime, organizational crime, occupational crime, and fraud prevention. Other key findings include:
  • The median loss caused by the occupational fraud cases in the study was $160,000. Nearly one-quarter of the frauds involved losses of at least $1 million.
  • The frauds lasted a median of 18 months before being detected.
  • Fraud perpetrators often display warning signs that they are engaging in illicit activity. The most common behavioral red flags displayed by the perpetrators in our study were living beyond their means (43% of cases) and experiencing financial difficulties (36% of cases).
  • Occupational frauds are much more likely to be detected by tip than by any other means.
ACFE's Report to the Nations on Occupational Fraud & Abuse. Austin: ACFE, 2010 Global Fraud Study (www.acfe.com)

"According to the Centers for Medicare & Medicaid Services, national healthcare expenditures topped $1.3 trillion in 2000. Although the exact amount of healthcare fraud is difficult to determine, estimates range from three to ten percent, thus translating into staggering amounts of money lost to fraud."

"According to the USFA's National Fire Incident Reporting System (NFIRS) data and the National Fire Protection Association (NFPA), an estimated average of 316,600 intentional fires are reported to fire departments in the United States each year causing injuries to 7,825 firefighters and civilians. In 2006, ten firefighters died as a result of arson. In addition to needless injury and death, an estimated $1.1 billion in direct property loss occurs annually."

Arson for profit includes all arsons committed with the expectation of obtaining a gain from the perpetrator (arsonist). It is important to note that the perpetrator does not necessarily need to obtain gain, but to show the intent that gain was going to be obtained. The gain can be direct or indirect. An example of direct gain would be the collection of the insurance money for the replacement of a burned house. Indirect gain would be an increase of business by eliminating (burning) the competitor who was doing business across the street. One of the most important arsons for profit committed in the United States is insurance fraud. This kind of criminal act is relatively widely spread in the United States. Some arsonists found it easier to burn their homes rather than to invest money to repair them. Also, when a vehicle arrives at the end of a lease and the mileage is excessive, arsonists have burned the car, simulating an accidental fire, rather than paying for the extra mileage.

The U.S Chamber of Commerce estimates that theft by employees costs American companies $20 billion to $40 billion a year. To pay for it, every man and woman working in America today contributes more than $400 per year. The chamber also reports that an employee is 15 times more likely than a nonemployee to steal from an employer. Unfortunately, 75% of employee-related crimes go unnoticed.

Merchants lose an estimated $100 billion annually in unauthorized transactions. Bank losses due to check fraud are estimated at $700 million per year. Losses attributed to mortgage fraud were $4.2 billion in 2006 according to the FBI with another $1.2 billion spent on fraud prevention.