Beware, your most trusted employees could be fraudsters. You trust your employees to perform their daily job functions properly. Maybe they are not. How can you tell? Continue reading to learn about who tends to commit the costliest frauds and the red flags to watch out for.

In our previous two articles, 2022 ACFE Report to the Nations: Fraud Trends and Key Takeaways and Fraud: Is It Happening to You? we explored the Association of Certified Fraud Examiners (“ACFE”) 2022 Report to the Nations released earlier this year. The Report discussed emerging trends in fraud occurrence, detection, and impact, as well as how fraudulent acts are committed. In this article, we continue our 2022 ACFE Report series and take a deeper dive into the characteristics of the typical occupational fraudster.

The tone at the top plays a major role in how employees perform their jobs and their attitude towards the entire organization. However, even those charged with corporate governance can orchestrate nefarious acts. In fact, fraud schemes conducted by managers, executives and the Board of Directors tend to last the longest and cost the most. According to the study, although executives committed only 23% of the cases studied, the median loss was $337,000, significantly greater than losses caused by managers. This suggests that those charged with governance orchestrate more complex financial statement fraud than less complex schemes such as asset misappropriation.

Fraud Perpetrator Characteristics

While fraudulent acts can be orchestrated by anyone, there is no cookie-cutter description to identify a fraudster ahead of time. However, fraud perpetrators tend to be:

  • Employed 1-5 years with the victim organization (47% of cases); however, perpetrators employed longer than 10 years resulted in almost 3x higher losses of $250,000.
  • Male (73% of cases); however, the percentage of cases perpetrated by woman has increased over the past years, signaling a change with the times
  • 36-40 years old (20% of cases) and 41-45 years old (19% of cases); however, although those over 60 years old made up only 3% of the cases studied, the total median loss was more than double the other age groups.
  • Employed in Operations (15% of cases), Accounting (12% of cases) or Sales (11%)
  • University degree (47% of cases)
  • Never charged or convicted of a crime previously (87% of cases)

Behavioral Traits

When an employee is engaged in occupational fraud, that person will often display certain behavioral traits that tend to be associated with fraudulent conduct. Organizations should familiarize themselves with these red flags to identify employees who require closer scrutiny, keeping in mind that fraudsters may or may not exhibit one or more red flags. The five most common behavioral red flags of a fraud perpetrator are:

  • Living beyond ones means (39% of cases)
  • Financial difficulties (25% of cases)
  • Unusually close association with vendor/customer (20% of cases)
  • Unwillingness to share duties (13% of cases)
  • Irritability, suspiciousness, or defensiveness (12% of cases)

These characteristics are not meant to be all inclusive, but organizations should utilize this information to assess relative levels of risk among their employees. Importantly, organizations should keep an eye on their operations and investigate any suspected wrongdoing before the cost of the fraud becomes detrimental to the organization.

Withum’s Expertise in Occupational Fraud Investigations

Withum has extensive expertise in all facets of fraud prevention and detection. Our Forensic, Investigations and White-Collar Criminal Defense Team includes Certified Public Accountants (CPA), Certified Fraud Examiners (CFE), and Certified in Financial Forensics (CFF) professionals with decades of investigative experience. If your organization wants to proactively combat the potential for such schemes or suspects they have fallen victim to an occupational fraud scheme, our diverse team can respond in a moment’s notice.

Stay tuned for the fourth article in this series, Don’t Be A Victim of Fraud – Protect Your Organization, in which we explore the global trends outlined in the ACFE’s 2022 Report to identify the types of organizations that are most at risk for a fraudulent attack and how Withum can help.

Contact Us

Contact any member of Withum’s Forensics, Investigations and White-Collar Criminal Defense Team with any concerns or questions.