The median loss to fraudsters in the US per fraud scheme is $150,000. Here are the top six behavioral characteristics of fraudsters.


“Spot the Fraudsters – Indicators of Fraud at Small and Medium Sized Businesses” by Toby Kaye, CPA | Senior Associate – Tax 

A 2016 global fraud study by the Association of Certified Fraud Examiners (“Report to the Nations on Occupational Fraud and Abuse”) distilled global data on the alarming effect of fraud on business owners. The typical organization loses 5% of revenues from fraud and the median loss in the US per fraud scheme is $150,000. These high losses were consistent regardless of the size of the business. Small businesses generally do not have the resources to continue absorbing these level of losses.

Small Businesses at Higher Risk of Fraud?

Yet small businesses may be more susceptible to fraud risks. They may not have the resources for proper segregation of duties or rapid growth has eclipsed management oversight. What should a business owner be aware of to identify people in the organization taking advantage of these fraud opportunities?

The median loss to fraudsters in the US per fraud scheme is $150,000. Here are the top six behavioral characteristics of fraudsters.

Behavioral Characteristics of Fraudsters

The study noted that fraud occurs across all positions and genders in the organization. Certain specific behavioral traits were observed in many of the personnel committing fraud. In fact, 79% of the fraud perpetrators exhibited one of the following six behavioral characteristics:

  • Living beyond financial means
  • Financial difficulties
  • Unusually close association with vendor/customer
  • Permissive attitude to fraud or unscrupulous behavior
  • Control issues. Ex. unwillingness to share duties
  • Divorce/family problems

Living beyond financial means was the most common trait for perpetrators at all levels in the organization. The second most common trait diverged between management and staff. Management demonstrated a permissive attitude to fraud or unscrupulous behavior in general. Staff were pressured by financial difficulties. Business owners should pay attention for employees or management that unexpectedly begin to sport flashy symbols of wealth, such as sport cars or jewelry.

Business owners should also keep a watchful eye on trends in the company’s financial ratios. For example, a sustained period of inventory growth exceeding sales growth could signal payments to unauthorized vendors or employee theft of physical goods. Deteriorating accounts receivable turnover could indicate shipments of goods to fake customers or an employee embezzling customer payments.

If you suspect fraud may be occurring in your business, or you’d like us to review your internal controls, please contact us at 330.867.7350.

A Business Guide to Fraud PDF