Fraud Incident Reporting Declines

Fraud incidents are on a downward slope, returning to reporting figures from two years ago, according to the Quarterly Corporate Fraud Index, which captures fraud incident activity from more than 1,000 organizations and 12 million employees worldwide.

The tracked cases include corruption and fraud, misuse of assets, conflicts of interest and Foreign Corrupt Practices Act (FCPA) violations. The Network, Inc., a provider of governance, risk and compliance (GRC) solutions, and BDO Consulting, a division of BDO Seidman, LLP, published the second quarter 2010 findings of its Quarterly Corporate Fraud Index.

In second quarter 2010, fraud incident reporting accounted for 19.6% of all compliance reporting activity from more than 1,000 organizations worldwide. This percentage has slowly declined during the past three consecutive quarters when fraud-related reports accounted for 20.2%.
“Following a surge of in-house fraud reporting last year, fraud incident reports have now returned to nearly the same levels as second quarter of 2008,” said Luis Ramos, CEO of The Network. “However, as compliance guidelines change due to legislation like the Dodd-Frank Act and UK Bribery Act, it is tantamount for organizations to stay ahead of the curve and proactively manage risk.”

Over the past five years, second quarter comparisons of fraud reporting are as follows:
•    Second quarter 2005—9.2%
•    Second quarter 2006—11.9%
•    Second quarter 2007—13.8%
•    Second quarter 2008—19.4%
•    Second quarter 2009—20.7%

•    Second quarter 2010—19.6%

As Timothy Mohr, Certified Fraud Examiner and partner at BDO Consulting, explains, “the slight decline in fraud reporting is partly due to senior executives more closely examining all aspects of GRC issues, particularly in-house fraud, and capturing misconduct from every single source to comply with new regulations.”

Regulatory agencies are also taking a more aggressive approach to investigating violations and raising the penalties for abuses according to the latest edition of the Kroll Global Fraud Report.