The Cost of Corruption: Corporate Fraud is on the Rise

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The Cost of Corruption: Corporate Fraud is on the Rise

According to reports from several organizations, incidents of fraud in the corporate sector are on the rise around the world. In 2018, these incidents cost companies from more than a hundred countries over $7 billion in total losses.

It’s not surprising that the rising tide of criminal activity and fiscal damage has prompted businesses to find ways to prevent corporate fraud from happening.

Companies in the Philippines should be especially wary of threats from inside and outside of their organizational structure. A separate study revealed that the Philippines is a leading source of online fraudsters in the whole world, naming the country as home to an industry of account farms, click farms, and spammers.

The Cost of Corruption

The Association of Certified Fraud Examiners (ACFE) released an alarming account of the growing threat of fraud to businesses worldwide. In this report, the organization analyzed 2,690 cases of occupational fraud. These cases were from 125 different countries, hailing from 23 categories of industry. This indicates that fraud can happen in any workplace, beyond the financial sector, anywhere in the world.

These fraud cases cost over $7 billion in total losses. The median loss per case of fraud was at $130,000. On the higher end of the scale, 22 percent of fraud cases that the ACFE looked into resulted in losses of $1 million or more each.

Cases of corporate fraud fell into general categories: asset misappropriation and financial statement fraud schemes. Although the former made up 89 percent of the cases, they only had a median loss of $114,000. On the other hand, fraudulent schemes involving financial statements were only 10 percent of the cases recorded, but their median loss was at $800,000.

Employees at the executive level only accounted for 19 percent of the cases the ACFE cataloged, but they proved to be among the most expensive for the unwitting companies that hired them. The median recorded loss for fraud committed by executives was $850,000.

A Focus on the Philippines

The ACFE listed 220 cases of workplace fraud in the Asia-Pacific region in 2018. Of this number, 25 of the incidents were in the Philippines, placing the country fourth in the region behind China, Australia, and Indonesia. Fraud trends in the region indicate that 51 percent of the incidents were cases of corruption, and 39 percent of victims were private companies.

The Philippines may be fourth in fraud cases in the region, but according to a separate study conducted by a fraud prevention firm, the country is the largest source of online fraud. The report looked into over 1.2 billion user transactions and analyzed the attack patterns of human and online fraud. It concludes that the Philippines far outstrips the other top five sources of online attacks.

What do these numbers mean for companies in the Philippines?

If these numbers convey anything, it’s that fraudsters can strike and come from anywhere. Any person in a company’s organizational structure could be a threat to the business’s financial health. Therefore, constant vigilance and integrity testing from every level of a company is necessary to prevent these fiscally devastating cases from threatening livelihoods and the company’s future.

Fraud Detection

According to the Association of Certified Fraud Examiners, businesses detected 47 percent of fraud cases in the Asia-Pacific region through tips. However, by the time a tipster calls a hotline, it’s too late. No business, whether you’re running a startup or managing an established corporation, can afford to catch fraud after it’s been committed.

Aptitude helps you explore the early-warning signs of corporate fraud on the second part of this two-part series post.

Learn about what we can do for your hiring process today.

1 thought on “The Cost of Corruption: Corporate Fraud is on the Rise”

  1. Pingback: Bad Banking: Fraudulent Scheme Costs Major Bank Millions

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