International Fraud Awareness Week

November 17-23 is International Fraud Awareness Week. The purpose is to educate individuals and businesses on the rising cost of fraud and how to protect themselves from fraud. Here are some myths about fraud and why they are not valid.

Myth 1 – Fraud is a victimless crime

Fraud impacts businesses and individuals internationally. On a business level, losses due to fraud were over $3.1 billion (US) between January 2022 and September 2023, as reported by the Association of Certified Fraud Examiners (ACFE) in their 2024 Report to the Nations. Organizations are estimated to lose 5% of their revenue annually to fraud.

The victims of these frauds vary depending on the business defrauded. Non-profit fraud victims are those supported by the non-profit (children, refugees, researchers) and the donors who provided funds. Government fraud victims are the taxpayers. Public fraud victims are the employees and shareholders. Private company fraud victims are the employees and owners.

On an individual level, victims are more easily identifiable. They include people convinced that a loved one is in need, those lured by promises of high-return, low-risk investments, and victims of identity theft. The list of victims is as extensive as the list of fraud schemes.

Myth 2 – Fraud only happens digitally; if I’m not online, it won’t happen to me.

While we would all like to believe that we are more intelligent than fraudsters, the truth is that none of us are 100% protected from fraud. In fact, according to Statistics Canada, 43.3% of the frauds reported between January 1 and September 30, 2024, were committed using means other than cyber fraud. Most of the victims were contacted by phone.

Businesses and individuals are potential targets, and there is no specific fraud victim profile. Grandparent schemes target seniors. Employment and landlord schemes target young adults. Phishing and subscription schemes target businesses. CRA and immigration schemes target new Canadians. Everyone is susceptible.  

Myth 3 – The police won’t catch the fraudsters, so why bother reporting them

The Canadian Anti-Fraud Centre (CAFC) estimates that 1 in 10 frauds are reported. This is higher than the ACFE’s estimate that 5% of occupational frauds are reported. In either case, the reporting statistics are alarmingly low. However, it is crucial to report fraud to the RCMP or local police as increased reporting leads to more funds being allocated to financial crime divisions for investigations. By reporting fraud, international law enforcement agencies can work together to investigate foreign fraud, while organizations like ICC Fraudnet work to assist victims of fraud worldwide.

Myth 4 – Fraud is easy to identify

We tend to think of fraud as a financial crime committed by bad actors in a foreign country who want to steal our money. This is true sometimes, but fraud takes many forms.

• Financial statement fraud could be used by businesses to make the company look more profitable than it is to get better lending terms from a bank.
• Intellectual property theft is a fraud that occurs when proprietary knowledge is stolen.
• Identity theft could be used to take over identities or used in part to make new identities.
• Corruption is a type of fraud that includes bribery and conflict of interest, and it is present in 48% of the cases reported in the ACFE 2024 Report to the Nations.
• Insurance and health care frauds could include kickbacks ranging from event tickets to jobs to financial gains.
• Forgery could be used to commit real estate fraud.

Recognizing these myths and gaining a deeper understanding of fraud strengthens our ability to prevent it. Talk to Certified Fraud Examiners (CFEs) with the training, education, and diverse experience necessary to investigate all types of fraud. CPAs and CIA can also provide information about prevention.

Reporting fraud to local police and government authorities is essential to ensuring adequate resources are available to find those responsible. By staying informed and vigilant, we can all help combat fraud and protect ourselves and our communities.

Kathleen O’Donoghue, CFE.