“He can rot in Hell!” That’s what Bevan Jones shouted as police took his 67-year-old brother, Earl, away in handcuffs from a Montreal courtroom in 2010 after he’d been sentenced to 11 years in prison for defrauding friends and family out of $50 million in an elaborate Ponzi scheme.\nBevan and his partner lost more than $1 million because of his brother’s blatant scheming. Even when Earl realized his long-term deception was about to unravel, he charmed Bevan out of his last $13,000 in savings, knowing full well that Bevan was battling a serious cancer condition. (Bevan passed away in 2013.)\nIt is more than likely that many, if not all, fraud victims would applaud Bevan’s angry outburst. Fraud, whether perpetrated on an individual or a business entity, exacts an emotional toll from its victims. It often takes a financial toll as well, ranging from small amounts lost by single investors or identity theft victims, to staggering losses resulting from intricate frauds perpetrated on companies.\nAs a forensic accountant, I always discuss with my clients and their legal counsel, if involved, the benefits of pursuing and/or reporting a fraud. I have to respect and follow their wishes, of course, but I believe I have a duty to present all the reasons why they and society can benefit from taking action. I also believe that all CPAs who are in a position to advise a company or client on what to do when a fraud has occurred have the same duty of care.\nIn her 2014 book Protecting You and Your Money: A Guide to Avoiding Identity Theft and Fraud, Kelley Keehn writes, “The best weapon against fraud is education.” I agree wholeheartedly. No one is naive enough to believe that fraud would suddenly be eliminated if all detected scams were reported. Not by a long shot. (To order the book, go to cpacanada.ca/FraudPrevention.)\nBut I do believe some fraudsters might be deterred if they saw that their ilk frequently ended up in court, and possibly prison.\nOne reason fraud is often taken too lightly is the perception that it is a victimless crime. During my career I have witnessed the ravages of fraud suffered by individuals at all levels of society, and I have seen the consequences to the bottom line experienced by corporate victims. Many of these victims feel similar degrees of betrayal, shame and anger as that expressed by Bevan Jones as he watched someone he had loved and trusted bow his head and refuse to look him in the eye as he was led off to jail.\nIf there is one absolute truth I have learned about fraud over the years, it is this: fraud is not a victimless crime. It causes financial and emotional distress for its victims, and often for their employees or loved ones as well.\nNot only does it harm the pocketbooks of its immediate victims, fraud costs all of us in one way or another, from increased prices of goods and services to compensate for a company’s losses, to the negative impact on health, productivity and faith in others that private individuals and corporate executives often say they experience.\nIn terms of the overall financial losses caused by fraud, it’s difficult to pinpoint exact figures. One problem is that some companies and individuals don’t report their losses, for a variety of reasons. For example, they don’t want the public or stakeholders (if they are privately held) to know that the fraud detection and prevention systems they had in place didn’t work. They would rather swallow their losses and continue as if nothing had happened, hoping to avoid any damage to their reputation or erosion in the confidence their customers or stakeholders have in them.\nOthers might not report a fraud because they simply didn’t know they’d been duped or they doubted anything could be done to remedy the situation.\nThat doesn’t mean statistics don’t exist. The CPA Canada 2014 Fraud Study, conducted by polling firm Harris/Decima, found that nearly one-third (29%) of 1,015 adult Canadians aged 18 and older, who have a spouse or partner living in their household, said they had been a victim of some form of financial fraud. Close to half (43%) knew someone who had been a victim of fraud.\nThe most common frauds reported by victims surveyed were credit and debit card fraud (71% and 28% respectively) followed by identity theft (7%), online fraud and email fraud (both 6%) and investment scams (5%).\nAlthough many victims of these types of fraud have their losses covered by credit card companies or banks, for example, the effort involved in recouping their money can eat up a burdensome amount of time and energy. To remain silent, however, likely emboldens the fraudsters. If the crime is that easy to get away with, why not keep doing it?\n“On average, identity theft victims spend more than four working weeks undoing the damage to their credit,” writes Keehn. “Six and a half percent of Canadian adults, or almost 1.7 million people, were the victim of some kind of identity fraud in 2008. These victims spent over 20 million hours and more than$150 million to resolve problems associated with these frauds.”\nWhen the cost of fraud is looked at on a national and even global level, the estimated numbers can be mind-boggling.\nThe Canadian Anti-Fraud Centre, which launched an online reporting tool in September, estimated in 2010 that fraud costs Canadians $10 billion to $30 billion annually.\nOn a worldwide scale, the cost of fraud to companies is so large the numbers can seem hard to fathom. According to the 2014 Report to the Nations on Occupational Fraud and Abuse, a global fraud survey published by the Association of Certified Fraud Examiners, a worldwide organization based in the US, “the typical organization loses five percent of [its] revenues each year to fraud. If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly [US]$3.7 trillion.”\nWhile it might seem obvious that someone has to pay for these staggering fraud losses, my experience investigating all types of fraud is that few people look beyond their own plight. They can see what has been taken away from them but rarely do they consider that there’s a larger societal problem affecting all of us.\nInsurance fraud, which many otherwise upright individuals often commit by filing false or inflated claims, can be used as an example of how fraud hurts more than the insurers. When Don’t Be Scammed: Fraud Prevention Month 2014 was launched by the Insurance Bureau of Canada (IBC), the Financial Services Commission of Ontario, Toronto Police Services and other organizations involved with fraud awareness, one of its main goals was to educate Canadians on just how much fraud costs the average Canadian.\n“Insurance fraud is a huge problem in Canada,” the IBC said in a news release. “In 2012, the Ontario Automobile Insurance Anti-Fraud Task Force cited a study that estimated that automobile insurance fraud cost between $770 million to $1.6 billion per year — in Ontario alone.” Insurance claims are paid for from the premiums of all policyholders. “Fraud is a crime of deception,” says Kathy Metzger, an investigator with IBC Investigative Services. “Fraudulent claims are made to look like real claims, and when they are undetected, they are paid as real claims. Paid for from the premiums that you and I fund — and a key reason why honest policyholders pay more than they should for auto insurance,” she adds.\nIn the US, the Coalition Against Insurance Fraud has a strong message on the home page of its website: “Insurance Fraud: The Crime You Pay For.” The coalition estimates that at least US$80 billion in fraudulent claims are made annually in the US. “This figure includes all lines of insurance. It’s also a conservative figure because much insurance fraud goes undetected and unreported,” it says. “Fraud contributes to higher insurance premiums because insurance companies generally must pass the costs of bogus claims — and of fighting fraud — onto policyholders. This contributes to a premium spiral that can price essential insurance coverage, often required by state law, beyond the reach of many consumers and businesses.”\nAlthough the numbers of people and companies who fall victim to fraud are indeed high, there is a bright side. “Canada is one of the most fraud-free countries in the world, according to a recent study,” The Globe and Mail reported in 2012. “The overall prevalence of Canadian fraud cases — from money laundering to information theft — ‘dropped much more quickly than elsewhere so that fewer than half of businesses were hit in the past year,’ the report noted. ‘On average, Canadian firms lost just 0.6 per cent of revenues to fraudsters.’”While that indeed is good news, it does nothing to ease the pain of those who have fallen victim to fraud. “An invisible bomb exploded in the lives of over 200 people,” Joey Davis, a member of the Earl Jones Victims Organizing Committee, told a parliamentary committee as he tried to explain what happened when the people scammed by Earl Jones found out that their supposed friend had taken their money, which he used to fund an extravagant lifestyle.\nThat kind of bomb has caused some companies to fail, cost some people their jobs and pushed others to despair. It has resulted in higher costs for many of us, often for reasons we don’t even know about. It’s time for all of us, especially CPAs, to do whatever we can to defuse such bombs, by urging the reporting of this insidious crime that makes victims of us all. \nDavid Malamed, CPA, CA•IFA, CPA (ILL.), CCF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto and CPA Magazine’s fraud columnist.