Business fraud a growing issue

Business fraud in the United States, including accounting abuses, embezzlement, and false disability claims, is having a huge impact on the nation's economy, according to several sources. The Association of Certified Fraud Examiners (ACFE) estimates that this year some 6% of total U.S. business revenues will be lost as a result of occupational fraud and abuse. When applied to the U.S. Gross Domestic

Business fraud in the United States, including accounting abuses, embezzlement, and false disability claims, is having a huge impact on the nation's economy, according to several sources.

The Association of Certified Fraud Examiners (ACFE) estimates that this year some 6% of total U.S. business revenues will be lost as a result of occupational fraud and abuse. When applied to the U.S. Gross Domestic Product, that translates into approximately $600 billion in losses annually, or $4,500 per employee, the group said.

Jim Murray, senior managing director for the New York office of Pinkerton Consulting & Investigations, said the profile of corporate crime hasn't changed much, but it has become a larger problem.

According to Murray, who is responsible for overseeing Pinkerton's Financial Investigations practice, dishonest corporate employees are much like they were in the past. They tend to be mid- to senior- level managers that work in poorly controlled environments. They are usually knowledgeable, respected and trusted employees who take advantage of control weaknesses, he said.

However, the magnitude of business fraud has substantially changed, with multi-million dollar and sometimes billion-dollar losses commonplace, Murray said.

"It was easy to predict that this would happen as a large portion of senior management compensation is derived from performance-based incentives," he explained. "Executives need to achieve their projected numbers to obtain desired compensation levels or justify their jobs. It becomes a temptation that some just can't resist."

To combat fraud, Murray said the most common method is acting on from employees, customers, vendors and anonymous sources. ACFE added that organizations with fraud hotlines have cut their losses by approximately 50% per scheme.

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