Managing Fraud Risk: A Practical Guide for Directors and Managers

ACFE Occupational Fraud Typology

The Association of Certified Fraud Examiners (“ACFE”) describes itself as “the world's largest anti-fraud organisation and premier provider of anti-fraud training and education”. Its aim is to reduce business fraud worldwide. Established in the US in 1988 by the renowned fraud expert Dr Joseph T. Wells, it is in my view the most important single source on internal fraud and the risks posed to business organisations of all types today. It is well-established as a professional body that awards the qualification of “certified fraud examiner” to individuals passing its accreditation process. It has over 55,000 members in more than 140 countries around the world.

The ACFE focuses its attention on internal or occupational fraud. It defines occupational fraud as:

The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organisation's resources or assets.

The ACFE has carried out many studies and research projects on internal fraud. As a result of the research it has identified a number of key fraud characteristics, from which it has developed a typology for occupational fraud which the Association calls the “occupational fraud classification system”. This divides occupational fraud into three primary categories that are used by individuals to defraud their employers:

• Fraudulent financial statements schemes;
• Asset misappropriation; and
• Corruption.

In my opinion, these three categories provide ...