3 Safeguards for Fraud Prevention

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With how things are these days and companies being more focused on surviving the current economic crisis rather than working on growth, it is quite easy to forgo having a sound fraud risk management system. Truth is, it is now more than ever that a small fraud can cause an already fragile business to fail. With stakes that high, no company can afford to ignore loses.

If this is the current situation for business, then it is safe to say that the employees working for them are also under tremendous financial pressure these days. Honest workers can become dishonest employees at the flip of a coin. As we?ve discussed in previous blogs, opportunity and rationalization are both elements of the fraud triangle. All it takes for an employee to commit fraud is to be given the right opportunity and enough reason to do so, such as being in need of money.

This is where having a good fraud risk system factors in. Companies must have and implement a comprehensive fraud detection and prevention program just to be sure to minimize their risk of being a victim of fraud. But how to do so in a cost-effective manner?? Well, there are safeguards against fraud that can be implemented fast and cheap and we?re sharing 3 below!

Here are 3 easy safeguards that you can put in place to help minimize your business? fraud risk:

Background Check EVERYONE!

Yes, everyone, including the persons from top management. If you want to set an example, you do have to start from the top, right? More so, the best predictor of future behavior is looking at past ones. It might sound a bit discriminatory to flag people with a history of fraudulent behavior but hey, them knowing that you?re keeping an eye on them is an effective fraud deterrent.

Background checks provide valuable insight but you?ll have to first have permission to check certain information such as a person?s credit history. People who are more apt and/or have intent to commit fraudulent acts will rarely consent to having a background check, making this safeguard very effective at screening potential perpetrators of occupational fraud.

Exempt NO ONE

Companies that show that they?re serious about culling fraudsters have less possibility of having to deal to with fraud because they acknowledge that fraud can happen to anyone.

When an organization openly discusses fraud detection and prevention at orientations, staff meetings, and board meetings, it makes sure that everyone knows that there is zero tolerance for all forms of fraud. Think of this as a form on internal audit and really go after all fraudsters whoever they may be.

The no exemption rule goes for both fraud education and prosecuting those who?ve been found to commit fraud. If everyone sees that yes, everyone is obliged to attend fraud prevention meetings and that yes, no one is exempt once found out, you can be sure that every single person in your organization will be very well-behaved indeed ? including you!

Have a Whistleblower Hotline

Having a whistleblower program is part of having a great fraud risk management system in place because it gives witnesses a safer way to ?out? the fraudster. Of course the safest way to allow the whistleblower to come forward is to have a whistleblower hotline as part of your program!

When witnesses have less fear that the fraudster will come after them after being reported, then they are more apt to come forward. It also provides a clear avenue for reporting fraud without having to think of workplace politics because most whistleblower hotlines offers an option to be an anonymous tipster. Of course anonymous tips will have to be investigated before anything is ?truly? done to the perpetrator but at the very least, the hotline gives you a name and the type of fraud committed so you would know what would need investigating.

You can make use of companies that offers whistleblower hotlines for a very reasonable fee. A local private investigator company that offers corporate investigations and surveillance services is best to minimize the risk for the whistleblower and therefore increase the chances of someone reporting suspicious activities.

The safeguards discussed in here are by no means all that you?ll need, but the 3 we?ve discussed is a good start. Remember, the importance of having a comprehensive fraud detection scheme can?t be discounted when it comes to your business? health. Should you need any assistance or have any questions to implement the safeguards above, feel free to contact us.

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Haywood Hunt & Associates Inc. is pleased to announce the addition of Don Panchuk (BA MA CFE CRM) to our Corporate Investigations Division. Don served for 31 years in the RCMP, retiring as the Superintendent in Charge of the Integrated Market Enforcement Team in the Greater Toronto Area (GTA).