COLUMN: ‘Fraud prevention measures are vital’

Simon Lockley
Simon Lockley

Most businesses have fraud prevention measures of varying degrees of complexity and sophistication.

Most businesses have fraud prevention measures of varying degrees of complexity and sophistication.

These will have been designed not only to deter workplace fraud but also to aid in its detection. However, no system is fool proof and should be regularly reviewed for weaknesses and to ensure that procedures are being complied with.

It is galling for any employer to discover it had procedures in place to prevent a fraud but these were circumvented due to staff changes and ways of working within an organisation.

For example, where the checks and balances designed to prevent one person having the authority to authorise, check and make payments to suppliers have, over the course of time, left responsibility in the hands of one ‘trusted’ employee.

These are the sort of weaknesses a fraudster can exploit.

Equally important is creating a business culture that makes it clear that fraud is taken seriously. This sends out a signal about the conduct an organisation expects from its staff. One practical way to do this is have well publicised reporting procedures to facilitate the reporting of suspicions.

The evidence suggests this is an effective measure. In its 2014 Global Fraud Survey, the Association of Certified Fraud Examiners (ACFE) identified tip-offs as the most common detection method with over 40 per cent of employee fraud cases being detected as a consequence of a tip-off.

The ACFE also found that organisations with a hotline that enabled staff or third parties to report concerns were more likely to detect a fraud.

This can have a real impact as the likelihood is that frauds identified as a result of tip-offs are discovered sooner than they otherwise would have been. This in turn will often mean that the loss to the business is less than it would have suffered had an ongoing fraud been detected at a later date by other methods.

Finally, when fraud is suspected an employer should be prepared to respond quickly and in a way that does not alert the suspect employee that their wrongdoing is about to be uncovered. Securing the available evidence before it can be tampered with or destroyed can be key to the investigation. It can also significantly increase the prospects of a successful civil recovery action against the employee to recover the loss suffered by the business.