What is internal fraud?
Internal fraud occurs when an employee deliberately misuses their position of trust to commit financial misconduct, either for personal gain or to cause losses to the institution. Unlike external fraud that originates outside the organization, internal fraud is perpetrated by individuals who have legitimate access to accounts, systems, and sensitive data. This can include falsifying financial records, misappropriating funds, or manipulating transactions to conceal illicit activities.
In a 2024 report, the Association of Certified Fraud Examiners (ACFE) found that insider fraud represents a significant risk to every organization's operations. ACFE reported that 5% of an organization’s revenue is lost to internal fraud each year, with an estimated $3.1 billion in total losses. Banking and financial services accounted for the largest share of internal fraud cases examined by ACFE.