I am Craig Hannaford and welcome to my new blog series for Haywood Hunt & Associates, which takes a closer look at fraud in the workplace. I have been a Senior Investigator at Haywood Hunt since March 2019 focusing on commercial fraud, civil litigation support, investigative accounting, asset searches and miscellaneous problem solving.
I am the former head of the RCMP Commercial Crime Section and of the RCMP?s Stock Market Fraud Section. I am also a Licensed Private Investigator, a CPA (Chartered Professional Accountant) and a CFE (Certified Fraud Examiner). I have my Master of Science in Economic Crime Management and a Bachelor?s degree in Computer Science.
In today’s business world, most upper-level management personnel and business owners believe that their organization is safe from fraud. Most are under the impression that their employees, co-workers, and possibly co-owners have only the best intentions for the organization. It would be ideal if that were true, however, that’s often far from the truth.
According to the Fraud Triad, even with an organization full of trusted employees, as long as there is a susceptible individual, a need, and an opportunity, fraud is likely to occur.
Okay, okay. So you might think that this article is taking things to the extreme. You might think that no one in my organization would do something like that. The fact is, fraud is real and it is just one of the many complications that come with owning or managing a business.
A little over a year ago, a report which says that approximately 5% of every business’s revenue either gets stolen or goes to the pockets of fraudsters was published by the Association of Certified Fraud Examiners. You may think that 5% is nothing, but that’s equal to a worldwide loss of $3.7 billion each year!
Shocking, isn’t it?
Don’t be a victim yourself. Awareness is your most important weapon against fraudsters within your organization.
Eye Opener on Occupational Fraud
So, what is occupational fraud and who are the people who commit it?
Occupational fraud occurs when someone uses his or her position or occupation to intentionally misuse or misallocate their organization’s or company’s resources and assets.
Occupational fraud has many faces. There’s corruption which occurs when someone accepts bribes or extorts money. There’s asset misappropriation such as what happens when someone in the organization tampers with a check or steals money or things. Last but not the least, there is financial statement fraud which occurs when assets or revenues are either overstated or understated.
Of all the types of occupational fraud, the most common one is the misappropriation of assets. It accounts for 85% of all occupational fraud cases. However, the most expensive for your organization is financial statement fraud. Why? Because a CEO who hides millions will cause more losses to a company compared to several employees who are just stealing office supplies and taking them home.
Discover and Stop Occupational Fraud
The more time fraudsters have free reign in your organization, the more losses they will cause for the business. Remember that fraudsters will find ways to hide their actions and will want to bleed your organization dry for as long as they can. This is why finding them is so important in preventing and stopping occupational fraud.
Here are two things you can explore to prevent and stop occupational fraud.
- Avoid hiring people who are likely to commit fraud by conducting background checks for new hires, and
- Check your company’s functions and framework to identify weak spots that fraudsters might use.
But Who to Pin Down First?
Because a person of power (one who holds a higher position) can cause the organization to lose more money and resources when it comes to fraud, it goes without saying that a fraud investigation should begin with those holding key positions.
Some signs that can point to a need for investigation include living above his/her means, lavish vacations, having off-shore bank accounts, and purchasing things that are too expensive compared to how much the person is making.