The mining industry recorded the biggest overall increase in fraud cases, climbing 30 per cent over the last four years, from 20 cases to 26, according to a new report.

Conducted by SEON, a fraud prevention organization, the research which reviewed the Association of Certified Fraud Examiner’s Report (ACFE) to the Nations also compared the figures to the report four years prior, to assess which industries have experienced the most fraud cases.

According to the report, the mining industry also suffered the largest median loss of all industries examined, at $475,000. Despite the increase in reported fraud cases, the industry reported a median financial loss of 5 per cent, though this number has decreased in the last four years.

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

Apart from this, the number of cases reported in real estate followed that of mining, coming in at 26.8 per cent increase in cases of fraud in the past four years. The median loss of real estate fraud also increased within the period, compared to years prior. This has increased by 27 percent, up to $254,000 from $200,000, SEON said.

Telecommunication industry’s fraud followed, rising by 8.1 per cent over the last four years. The industry’s fraud involved “anything from fixed line fraud to subscription fraud and SMS phishing”. Of all the fraud cases recorded in the telecommunications industry, 56 per cent were classified as corruption, while 31 per cent of the cases were non cash.

Telecommunications is also one of the industries seeing an increase in the median loss from fraud, rising by 28.9 per cent in the last four years to $250,000.

Looking at the most common corruption fraud schemes in 14 industries, the report highlighted that “it is the most common type of occupational fraud in almost every industry in the study, accounting for up to 66% of cases in some sectors”.

Among the sectors with the biggest median loss from fraud cases over the last four years, the healthcare sector comes first, with an increase of 66.7 per cent compared to the previous year. The value of median loss increased from $120,000 to $200,000. The utilities sector came second, with median loss from fraud cases increasing by 59.8 per cent, representing a rise to $163,000 from $102,000 four years ago.

Corruption Fraud Schemes

Corruption fraud schemes are considered as the most common type of fraud scheme faced by business in the report. Corruption fraud schemes include bribery, paying “gratuities” to close sales, kickbacks from third parties to employees in return for industry benefits, and making false health insurances claims by colluding with medical providers.

While most businesses have a form of anti-corruption or anti-bribery policy in place, implementation of these policies are the more importantly crucial.

“The 2020 ACFE Report to the Nations found that operations, accounting and executive/upper management are the most common departments for fraud perpetrators, although this varies by business size, location and industry type.”
SOEN

Billing fraud, or invoice fraud, comes second, as the most common type of fraud scheme faced by business in the report. Billing fraud primarily affects the professional services industry, including the accounting, legal and finance sectors, and education.

According to the report, invoice fraud can be avoided by spreading awareness and introducing certain controls into the process. This could take the form of contacting suppliers in the instance of any invoice queries, checking the payment details of the supplier with your own records, and refraining from immediately transferring sums of money due to pressure.