But the statistics collected by the Austin, TX.-based Association of Certified Fraud Examiners (ACFE) based on the 1,134 cases investigated by members in 2006 are nevertheless hair-raising. American organizations lose about five per cent of their annual revenues due to fraud, and occupational fraud is becoming increasingly difficult to detect ”“ the typical time elapsed to detect a scheme is 18 months.

“I would say about 75 per cent of companies don’t report the crime externally,” says Marty Musters, director of forensics at Mississauga-based NCI Inc., an IT security provider.

“Technology presents more opportunities for fraud as systems grow more complex, and more people have access to them today,” says Musters. “I’m seeing more crimes of theft of intellectual property, and people running private businesses on corporate networks.”

But most companies prefer to terminate fraudsters rather than to prosecute them to avoid negative publicity ”“ so doing background checks on staff isn’t enough to suss out the bad apples. In one notorious case, a CFO defrauded a succession of seven U.S. companies before a company finally laid criminal charges, says Gary Butler, director of the centre for financial services at Toronto-based Seneca College.

“Companies were embarrassed they’d hired this guy so they fired him ”“ but his employment contracts called for him to get letters of reference on termination. These fraudsters often get the opportunity to move on to new companies and do it all over again. Under-reporting is a huge problem in the industry. And in Canada, privacy laws prevent disclosure of personal information, which can open the door to more fraud.”

As a consequence, organizations are increasingly concerned to have the right in-house expertise to root out fraud schemes before they escalate into full-blown fiascos such as Enron, Worldcom and Bre-X. And legislation such as Sarbanes-Oxley and Bill C-198, which holds senior management more accountable for their organizations’ financial workings, is spurring changes in corporate culture. “CEOs are being more pro-active about ensuring no fraud is happening, and this means they need staff who are looking for it,” says Musters.

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