2020 Report to the Nations: organizations opting more for civil litigation, internal punishment

According to the ACFE’s 2020 Report to the Nations, organizations are favoring civil litigation and internal punishment over referring their fraud cases to law enforcement. Organizations opting for civil litigation increased to 28% in 2020 from the average of 23% for the past decade. Similarly, referrals to law enforcement have dropped from 69% in 2008 to 59% in 2020.

“We have seen more organizations focusing on internal discipline and civil litigation instead of seeking criminal prosecutions,” said John Warren, J.D., CFE, vice president and general counsel of the ACFE, and one of the co-authors of the report.

When respondents were asked why cases weren’t referred to law enforcement, 46% said the organization felt internal discipline was sufficient — a sentiment that has increased from an average of 33% in the past years. Private settlements as a reason to decline criminal referrals has also increased from 21% to 27%.

The 2020 Report to the Nations, a study of 2,504 cases of occupational fraud investigated by CFEs in 125 countries, also found that a single case of occupational fraud costs a victim organization an average of more than $1.5 million. CFEs estimate that organizations lose 5% of their revenues each year to fraud. The typical fraud lasted 14 months before it was detected and caused a median loss of $8,300 a month.

An encouraging trend has been the increase in anti-fraud controls. The implementation rates of both hotlines and established anti-fraud policies have gone up 13% in the past decade. Targeted anti-fraud training for employees and company leadership has also increased. “We see more recognition of fraud risks in many organizations than we saw 10 years ago,” Warren said.

Tips remain the most common way for fraud to be detected, accounting for 43% of cases, but the ways in which whistleblowers report their concerns is shifting. Tips are increasingly coming in through web-based forms (32%) and email (33%), while the use of telephone hotlines has dropped from 40% to 33% since 2016.

Check and payment tampering was four times more likely to occur in organizations with 100 or fewer employees. Small businesses were also two times more likely to experience billing and payroll fraud. While financial statement fraud accounted for the least number of cases, it was the costliest form of fraud studied with a median loss of $954,000 per instance.

“The first Report to the Nation was launched in 1996 by ACFE founder and Chairman, Dr. Joseph T. Wells, CFE, CPA, because he recognized that there was a glaring lack of information about occupational fraud,” says Bruce Dorris, J.D., CFE, CPA, president and CEO of the ACFE. “More importantly, he also recognized that the ACFE was uniquely situated to address the problem because we were sitting on what was probably the greatest source of fraud information in the world — the collective knowledge and experiences of the Certified Fraud Examiners who make up our association.”

The report, now in its 11th edition, is regarded as the most authoritative statistical resource available on occupational fraud.

The 2020 ACFE Report to the Nations is now available for download.