The ACFE’s 2012 Report to the Nations on Occupational Fraud and Abuse recommends background checks that include: past employment verification, education verification, criminal record checks, civil record checks, credit checks, reference checks, and drug screening.
The Association of Certified Fraud Examiners’ 2012 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,388 cases of occupational fraud that occurred worldwide between January 2010 and December 2011. According to the report:
- The typical organization loses 5% of its annual revenue to occupational fraud.
- The median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of the cases caused losses of at least $1 million.
- Occupational fraud is a significant threat to small businesses. The smallest organizations suffer the largest median losses.
- Nearly half of victim organizations do not recover any losses that they suffer due to fraud.
- In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct. Living beyond means (36% of cases), financial difficulties (27%), unusually close association with vendors or customers (19%) and excessive control issues (18%) were the most commonly observed behavioral warning signs.
The report provides a Fraud Prevention Checklist that recommends a background check (as allowed by law) that includes:
- Past Employment Verification
- Education Verification
- Criminal Record Checks
- Civil Record Checks
- Credit Checks
- Reference Checks
- Drug Screening
- Occupational fraud is a significant issue to all employers, especially small businesses.
- Thorough background check procedures are one of the protections employers need to put in place.