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Nigeria ranks 2nd in occupational fraud, abuse in sub-Saharan Africa

fraudembezzNigeria, Africa’s largest economy, ranks second in occupational fraud and abuse in sub-Saharan Africa (SSA), a 2014 report by the Global Fraud Study has shown.

Global Fraud Study examines the impact of various forms of fraudulent practices on businesses and the people around the world. The 2014 study analysed 1,483 cases of occupational fraud that occurred in more than 100 countries.

The report, which is released every two years, says SSA recorded 173 cases of occupational fraud, out of which Nigeria has 36 cases, behind South Africa with the region’s highest.

Incidence of fraud costs a company an average of at least $1 million (N162 million), while the SSA countries lost $120,000 (N19.4 million) on the average on occupational adfraud and abuse.

“North Africa and Middle East had the largest percentage of reported corruption followed by SSA,” says the report.

“This analysis only represents the cases reported to us by the Certified Fraud Examiners (CFEs) who investigated those cases, and therefore it does not necessarily reflect overall levels of corruption in each region”, the report adds.

In SSA, tips which recorded 42.4 percent had the highest percentage of fraud followed by management review with 15.1 percent and internal audit with 8.2 percent.

Risks faced by small business differ from those faced by larger organisations, with certain categories of fraud being much more prominent at small entities than their larger counterparts.

The banking and financial services, government and public administration, and manufacturing industries continue to have the greatest number of cases reported, according to the report.

Anti-fraud controls by regions show that nearly half of the organisations in SSA had a dedicated fraud department, function or team.

Position of perpetrators based on regions reveals that 43.8 percent of fraudsters are managers, 40.8 percent are employees and 12.4 percent are owners/executives in SSA.

Most of the fraud perpetrators in SSA are male with 78.9 percent, the report noted.

The report further says that proactive measures caught fraud sooner and minimise losses, while frauds that are caught by reactive measures last longer and cause more harm. Also, organisations that employ CFEs record fraud losses that is 53 percent lower on average, the report states.

Occupational frauds can be classified into three primary categories: asset misappropriations, corruption and financial statement fraud.

Asset misappropriations are the most common, occurring in 85 percent of the cases in the study, as well as the least costly, causing a median loss of $130,000.

In contrast, only 9 percent of cases involved financial statement fraud, but those cases had the greatest financial impact, with a median loss of one million dollars. Corruption schemes fell in the middle in terms of both frequency (37 percent of cases) and median loss ($200,000).

Collusion helps employees evade independent checks and other anti-fraud controls, enabling them to steal larger amounts, the report states.

The Central Bank of Nigeria’s (CBN) report for the first half of 2013 had indicated that there were 2,478 fraud and forgery cases involving Nigerian banks valued at over N20 billion.