Good news for companies industry-wide: While the reporting of fraud-related incidents has significantly increased over time, especially a surge of in-house fraud in 2008, fraud reports have stopped climbing in 2009—even decreasing slightly in Q3 and Q4 of 2009, according to the Quarterly Corporate Fraud Index.
The Network Inc., a provider of governance, risk and compliance solutions, along with BDO Consulting released the Q4 2009 findings of its Quarterly Corporate Fraud Index, an examination of incident report activity from 12 million employees worldwide. For this report the data represents a five-year period, 2004 to 2008. The data for 2008 was expanded to include 1,328 organizations from a wide range of industries—insurance included—representing a 59% increase from the number of organizations researched in 2007.
The leading incident rate categories for the insurance industry (and finance and real estate) in 2008 were personnel management, company/professional code violation and corruption & fraud. It is to be noted that there was a tremendous increase from 2007 to 2008 in the report rate for the company/professional code violations category with a jump from .83 to 2.22.
Findings in the finance, insurance and real estate industry from 2007 and 2008, where the means of awareness was known, showed the largest percentage of participants became aware of the reporting mechanism from the intranet, followed by alternative methods, other employees and the employee handbook. Over the five-year period, the intranet more than doubled in popularity, increasing 15%. This is a departure from the overall industry data where poster is the most popular communication awareness method.
“In the wake of an economic recovery, this leveling, even slight declining, of in-house fraud marks progress,” says Luis Ramos, CEO of The Network. “Yet, fraud reporting only tells part of the story. A leveling of the percentage of fraud reports could be the sign of a rebounding economy, a strong compliance program, or, in contrast, mean that employees are not aware of or comfortable with anonymous whistleblower reporting systems.”
According to a recent report by BDO LLP, nine out of 10 larger frauds are not reported to authorities.
“Companies need to continue to protect themselves from fraud regardless of where the fraud incident reporting percentages fall,” says Timothy Mohr, certified fraud examiner and partner at BDO Consulting. “This will build a stronger ethical foundation that will pay off for companies as the economy recovers.”
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