The main type of financial fraud that can affect businesses is occupational, or insider, fraud. The main perpetrators of occupational fraud are employees, management or senior management (including directors).
Occupational fraud can be grouped into three main categories:
Corruption, including conflicts of interest, kick-back schemes, inappropriate gifts or some form of extortion.
Asset misappropriation, including theft of cash on hand, diverting cash receivable, intercepting payments and inappropriate use of business assets.
Financial statement fraud, including falsifying accounting records, management accounts and annual financial statements.
Other financial fraud types can exist outside companies, however. Businesses are also susceptible to fraudsters pretending to be customers and ordering goods without the intent to pay for them, or suppliers lying about the goods they have provided or work they have carried out.
Investment businesses can also be targeted by fraudsters trying to induce funding of fictitious or underperforming opportunities.
Fraud is distinct from cyber-crime, where there is an attack on businesses’ IT infrastructure. However, fraud may be cyber-enabled, where fraudsters use technology to assist in committing it.