Safeguards to Fraud
Insights from MNP’s 2019 National Fraud Study

What do we really know about fraud in Canada? Public reports on fraud cases centre on the dollar value defrauded and by whom. However, these often lack key details needed to create stronger anti-fraud processes — not just about the perpetrator, but what positions they held, deception methods, length of fraudulent behaviour and post-detection outcomes.

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  • Fraud schemes in Canada last approximately three years on average before being detected.

  • Twice as many men are sentenced for fraud and they defraud four times the amount of their female counterparts.

  • Restitution is only ordered in 70 percent of cases; and only for 29 percent of the amount defrauded.

For more information on how you can prevent fraud in your organization, download a copy of the MNP report Fraud in Canada: A New View.

For a stronger analysis, MNP examined the details from hundreds of fraud cases prosecuted across Canada between 2012 and 2018 which resulted in convictions for fraud over $5,000. Through this meta analysis, our intent is not only to better understand fraud through our data, but also help our clients implement the best procedures and policies to prevent it.

Who Fraudsters Are

Male fraudsters outnumber females two to one; the total amount men defrauded is also four times greater than their female counterparts. Age also appears to be a factor in the monetary size of frauds. About 62 percent of the fraudsters, both male and female, were between 40 and 59 years old and those persons misappropriated significantly more than younger fraudsters. In fact, the number of people in their 20s taken to court and convicted of fraud was relatively low, with none under the age of 22.

It turns out people in established positions are taking advantage of misplaced trust to perpetuate crime. Increased age correlated with increased money lost — with a median of $400,000 across the country misappropriated by people in their 50s. The average median value defrauded by criminals in their 70s was even higher, at $787,338.

What Drives Fraudsters

Greed was the motivation for a whopping 63 percent of the frauds MNP researched. Gambling, financial hardships, drug addiction and relationship needs came in far behind. Trying to make ends meet, shoring up a failing business and paying for family medical procedure were other minor factors.

The average of the losses inflicted by fraudsters in a position of trust was more than double the average losses from those not in trusted positions. Fraudsters in a position of trust were also able to perpetuate their crimes longer than those who weren’t by a median of a year.

Most fraud schemes lasted about three years, with the longest (a Ponzi scheme) bilking victims over 28 years. Unsurprisingly, criminals playing the long game — five years or more — stole far more than those detected within a year.

Are you Fraud Safe?

  1. Create an internal culture that is intolerant to fraud.
  2. Clearly state your position on fraud, wrongdoing and negligence in your Code of Conduct, mission statement and internal practices.
  3. Learn the history and background of all your employees and require they take regular vacations.
  4. Know your internal fraud vulnerabilities.
  5. Implement and test fraud mitigation policies and procedures.
  6. Appropriately segregate duties in your office to decrease the risk of fraud.
  7. Perform and review accounting reconciliations in a timely fashion.
  8. Monitor financial reporting and accounts regularly — and understand what your financial results should look like.
  9. Create a management oversight system to review the work of your support staff.
  10. Ensure your people feel comfortable coming forward with ethical or fraud-related concerns.
  11. Assess your team’s personal and professional ethics in annual performance evaluations.
  12. Require management oversight to complete banking activities.
  13. Manage and track your inventories.

What Happens to Fraudsters

People who committed fraud from positions of seniority received tougher sentences, even when the losses were lower — which implies the size of the fraud does not influence sentencing so much as who committed the crime. 

However, although the maximum penalties for fraud have increased since 2012, the research doesn’t necessarily reveal longer prison sentences. More importantly, restitution was only ordered in 70 percent of convictions — and even then, only ordered to an extent of 29 percent of overall fraud losses. And worse, there is little recourse to victims if the perpetrator does not fulfill the restitution order.

Solutions to Secure Your Business

As we start to understand who fraudsters are and recognize the root causes of fraudulent behaviours, the path to prevention becomes clearer. From the executive suite to the mail room, effectively stopping an incident before it starts begins at the boardroom table.