Half of large Canadian companies hit by employee fraud attempts, execs say: study

Mid-sized companies safer, but less successful at catching fraudsters 

Toronto, ON  (08 Dec. 2010)  – Forty-eight per cent of executives at large Canadian companies said that employees have attempted to defraud their organization, while only 35 per cent of mid-sized company execs said they, too, face internal fraud issues. Regardless of company size, employees who attempt fraud were very likely to be caught, according to the findings of a SAS/Leger Marketing survey of more than 1,000 Canadian executives conducted earlier this year.

Only four per cent of executives at large companies said employees who committed fraud escaped being caught, whereas ten per cent of those fraudsters at mid-sized companies eluded detection, according to executives. More than two-thirds of the fraudsters were tracked down after the fraud occurred (74 per cent and 69 per cent respectively for large and mid-sized companies). In approximately one in six cases (14 per cent at large companies, 16 per cent at mid-sized) the company identified the fraud attempt and stopped it before it could occur.

"There needs to be a paradigm shift where the focus is on catching fraud before it occurs rather than tracking it down after," said Wes Gill, Executive Lead of Enterprise Risk Management with SAS Canada. "While diligence and perseverance help, technology is the key. Business analytics software can identify fraud as it is evolving, helping companies identify it before it has actually occurred. Would you rather round up the horses after they've left the barn or prevent them leaving in the first place?"

Customer fraud a concern too
Customer fraud, which could include everything from insurance scams to credit card and mortgage fraud, was also a bigger concern for large companies, with 47 per cent of executives saying they had been affected, versus 30 per cent for mid-sized companies. At large companies, seven per cent of customer fraudsters were not caught versus 12 per cent at mid-sized companies, according to the executives.

The financial, food/retail, and government sectors were the biggest victims of customer fraud attempts, with 60 per cent of food and retail executives, 59 per cent of finance executives, and 44 per cent of government executives saying they have been impacted by customer fraud. The lowest incidences were in the professional consulting, real estate and legal professions, with 16 per cent saying they have faced customer fraud.

• 30 per cent of finance companies often use business analytics software to help detect fraud
• 25 per cent of retail and food companies often use business analytics software to help detect fraud
• Only eight per cent of government executives said their organization often uses business analytics software to help detect fraud
  

"As the survey results indicate, certain industries are more affected by fraudulent activities than others," Gill said. "Though many organizations can benefit from the use of business analytics to detect fraud, the one concern I have from these results is that government, third highest in terms of customer fraud attempts and second highest in terms of employee fraud attempts, is not a big user of technology designed to detect fraud."

While there was not a lot of variance nationally when it came to customer fraud attempts (the national average was 39 per cent), Alberta was quite a bit higher than Quebec (48 per cent versus 36 per cent). When it came to internal fraud attempts, B.C. and Quebec were above Ontario, with 49 and 46 per cent respectively saying they had been impacted by employee fraud versus 37 per cent for Ontario.  The national average was 42 per cent.

Stats at a glance
The survey also revealed that:

• 51 per cent of mid-sized companies tracked down the occurrence of customer fraud after it occurred
• 47 per cent at large companies tracked down the occurrence customer fraud after it occurred
• 31 per cent of all customer fraud was identified before it could occur (the same for both large and mid-sized companies)
• 55 per cent of food and retails executives said an employee had attempted to defraud their company
• 46 per cent of both government and finance executives said they had been hit by employee fraud attempts
• The lowest for employee fraud were the professional consulting, real estate and legal professions, with 23 per cent saying they had been victim of employee fraud attempts
  

About the Survey
This online comprehensive national executive survey was conducted for SAS Canada by Leger Marketing between March 3^rd and March 26^th, 2010, during National Fraud Prevention Month, with a representative sample of 1,022 senior-level business decision makers. This is the fourth and final installment based on the survey results. This method simulates a probability sample which would yield a maximum margin of error of +/-3.1%, 19 times out of 20.

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