A New Report has Revealed the Industries Most at Risk of Fraud – Construction is the 11th Most at Risk

Industry Fraud Index

The research, conducted by SEON, reviewed the Association of Certified Fraud Examiner’s Report to the Nations and compared the figures to the report 4 years prior, to identify which industries have suffered the largest increase in fraud.

You can read the research in full here: https://seon.io/resources/industry-fraud-index/

5 industries seeing the biggest increase in fraudulent activity:

RankIndustryNumber of cases 2014-15Number of cases 2018-19% increase in number of cases
2Real Estate415226.8%
4Arts, Entertainment & Recreation37395.4%
5Banking & Financial Services3683864.9%

The mining industry has seen the biggest overall increase in fraud cases, climbing 30% over the last 4 years (from 20 cases to 26). The mining industry also suffered the largest median loss ($475,000) of all the industries examined. Despite the increases in fraud cases in the industry, this median financial loss has decreased by 5% in the last four years.

Fraud in the mining industry can take many forms, from inventory theft to improper asset evaluations. The four main types of mining fraud are: environmental, forestry, occupational and reserves or resources reporting.

The real estate industry has seen the second biggest overall increase in cases, climbing 26.8%. The highest cases of fraud are seen in corruption (including bribery and extortion) and skimming. Real estate also faced the fifth highest increase of median loss, which increased by 27% in the last four years, jumping from $200,000 to $254,000.

Telecommunications ranks third with an increase of 8.1%. Although this increase is considerably lower than those preceding, the industry still faces a fast rise in cases. Telecommunications also faces the fourth highest increase of median loss, rising by 28.9% and reaching $250,000.

Telecommunication fraud involves anything from fixed line fraud to subscription fraud and SMS phishing. 56% of all telecommunication fraud cases are classed as corruption, whereas 31% of cases are ‘non-cash’.

The report also details the industries that are facing the highest increase in median loss:

RankIndustryMedian loss 2014-15Median loss 2018-19% increase in median loss
1Health care$120,000$200,00066.7%
3Services (other)$100,000$150,00050.0%
5Real estate$200,000$254,00027.0%

The health care industry faces the highest increase, with a percentage increase of 66.7, jumping a staggering $80,000 over the last 4 years. Healthcare fraud can involve fraud committed by health care providers, patients, or anyone who files dishonest healthcare claims in order to gain profit. 

Marginally smaller than its preceder, the utility sector faces the second highest increase in median loss (59.8%). Utility fraud includes tampering with meters, using others’ information to order utilities and even SMS phishing scams. 

Despite the increase in median loss, the utility industry has seen a decrease in cases over the last 4 years – falling 50% from 40 cases to 20. While this could be an indicator that the risk of fraud in the utility industry is lessening, it could also suggest a reduction in the number of employed Certified Fraud Examiners in the industry.
The services sector, excluding professional services, faces the third highest increase in median loss (50.0%) – rising from $100,000 four years ago to $150,000.

Although financial losses in the industry have increased, the number of cases has decreased by more than half (57.1%). Again, while this could be an indicator that the risk of fraud in the industry is lessening, it could also suggest a reduction in the number of employed CFE staff.

Further Insights:

  • Corruption is the most common occupational fraud scheme, ranking first in 14 separate industries.
  • Non-cash fraud is the second most prevalent type of occupational fraud scheme in five industries, including telecommunications, food service and energy.

You can read the full report here, I have also included a Dropbox folder with relevant images here.

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