Corporate Fraud Turns a Corner

Corporate fraud appears to be on the decline, according to a report that just came out today from The Network and BDO Consulting. The second-quarter findings from their Quarterly Corporate Fraud Index are, unfortunately, only available in press release form, but they do indicate the percentage declining.

In second-quarter 2010, fraud-incident reporting accounted for 19.6 percent of all compaliance-reporting activity from more than 1,000 organizations worldwide. This percentage has slowly declined during the past three consecutive quarters when reports accounted for 20.2 percent. The peak was in second-quarter 2009, at 20.7 percent.

“Following a surge of in-house fraud reporting last year, fraud reports have now returned to nearly the same levels as second quarter of 2008, ” Luis Ramos, chief executive officer of The Network, says.

Timothy Mohr, a BDO partner, attrubutes the decline “to senior executives more closely examining all aspects of governance, risk and compliance issues … and capturing misconduct from every single source to comply with new regulations.”

Ramos cautions that “fraud reporting only tells part of the story. A leveling, or even declining, of the percentage of fraud reports could be the sign of a rebounding economy, a strong compliance program, or, in contrast, [might] mean that employees are not aware of, or comfortable with, anonymous whistleblower-reporting systems.”

So does this mean that fraud cases are going down? Clearly, hard to say. It could also be a reflection of a recovery that has yet to be realized in fully restaffed companies, I suppose. Fewer employees, fewer reports … though that hardly explains the 2009 spike.

Just another way to keep an eye on the times. And remember, says Ramos, “as compliance guidelines change due to legislation like the Dodd-Frank Act and UK Bribery Act, it is [paramount] for organizations to stay ahead of the curve and proactively manage risk.”