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A study of 12 million employees around the globe reports that corporate fraud is down for the third quarter of 2010 – after three years of surprisingly high growth.

The study is called the Quarterly Corporate Fraud Index, and is conducted every quarter by two companies – The Network, Inc. and BDO Consulting.

The most recent study numbers say that corporate fraud accounts for 18.8 percent of all compliance reporting activity. That’s down 20.7 percent from the second quarter of 2010. The report offers some clues as to why employee fraud is slightly waning – and better theft practices by companies is at the top of the list.

Overall, the total number of overall fraud-related incidents declined by 4.6 percent for the quarter, which is the lowest mark ever for the Index.

Here’s a rundown of the Index’s Third-Quarter readings for the past five years:

  • Q3 2005 = 10.3%
  • Q3 2006 = 12.5%
  • Q3 2007 = 13.3%
  • Q3 2008 = 18.6%
  • Q3 2009 = 20.2%
  • Q3 2010 = 18.8%

What’s behind the encouraging numbers?

For starters, new U.S. Securities and Exchange Commission (SEC) whistle-blowing rules – part and parcel of the recently-enacted Dodd-Frank Financial Reform Act, are helping companies fight fraud. But companies were ramping up whistle-blower programs well before Congress passed financial reform in June, 2010.

Says Luis Ramos, chief executive officer of The Network,” “Recent data shows that employees are comfortable with and consistently utilizing whistleblower reporting systems, and as a result, we are starting to see more companies successfully implement and communicate their government, risk & compliance (GRC) programs.”

The stakes are high for U.S. companies. The average large company lost $8.2 million to fraud-related events from 2005-2008, according to the 2008 Kroll Global Fraud Report.

Fraud experts say the reeling U.S. economy planted the seeds for more cases of consumer fraud, particularly from 2007-2010. But companies can better protect themselves not only with better whistle blowing practices, but via speedy and accurate reporting of fraud incidents, along with closer study of those near-misses when fraud losses were narrowly averted.

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