When performing forensic accounting engagements to detect or quantify employee theft or other types of fraud that has occurred in organizations, we often find that there is more than one person involved in the fraudulent scheme.
A recent study discussed in Fraud Magazine analyzed the impact of collusion on fraud. In the study, convicted fraud perpetrators from three federal prisons were interviewed. Approximately 59 percent of the interviewees stated that their fraudulent activity involved more than one person.
The Association of Certified Fraud Examiners’ 2014 Report to the Nation compared the types of fraudulent schemes committed by a single individual versus the types of schemes committed by groups. The biggest difference related to corruption schemes. Less than one-quarter of solo fraudsters were engaged in corruption schemes. When there were multiple people involved in the fraud, the frequency of corruption schemes jumped to 57 percent. Additionally, the misappropriation of non-cash assets was much more common when collusion was involved.
According to the ACFE, the types of schemes that are more common among fraudsters who act alone are expense reimbursement schemes, skimming, check tampering, payroll fraud and cash larceny.
Organizational leaders should be aware of the types of collusion that can lead to fraud in their company. Leaders should consider how groups of employees may be able to overcome internal controls and commit fraud. Paying close attention to corporate culture and different sub-groups or close-knit groups of employees in high risk areas of the organization can help address the chance of collusion occurring.
By Julia Allen Miessner, CPA, CFF, CGMA