Fraud incident reports down, says report

A quarterly measure of fraud reporting among employees finds violations have dropped

Reports of fraud incidents are on the down swing according to the latest quarterly findings of the Quarterly Corporate Fraud Index, which examines fraud incident report activity from 12 million employees worldwide. The index is compiled from actual incidents reported by clients of The Network, Inc., a provider of governance, risk and compliance (GRC) solutions, and BDO Consulting, a division of BDO Seidman, LLP. Fraud-related incidents include reports on corruption and fraud, misuse of assets, conflicts of interest and FCPA violations.

According to the index, in third quarter 2010, fraud incident reporting accounted for 18.8 percent of all compliance reporting activity from more than 1,000 organizations worldwide. This percentage has trended downward over the past six consecutive quarters since the second quarter of 2009, when fraud-related reports accounted for 20.7 percent of all reports made.

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In comparison to the same time period in 2009, the total number of fraud-related incidents fell by 4.6 percent, which marks the first decline in third-quarter statistics since the inception of the Quarterly Corporate Fraud Index. Year-to-date for 2010, the average percentage of fraud-related calls stands at 19.5 percent, down 1.1 percent from 2009, researchers said.

"Fraud incident reporting has returned to the same levels seen at the end of 2008, but year-to-date, we're still seeing almost one in five calls being directly related to fraud," said Luis Ramos, chief executive officer of The Network. "There is still the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act to consider, and SEC regulations regarding the Dodd-Frank Act's whistleblower provision are now coming online. Corporations must remain vigilant regarding their compliance policies and risk management programs to deter malfeasance."

"Industry-wide statistics point to an increase in the amount of fraud, but the number of hotline fraud claims has gone down, perhaps the result of non-company based reporting or better risk management at the executive level," said Timothy Mohr, Certified Fraud Examiner and partner at BDO Consulting.

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