12 Tips for International Fraud Prevention Week

An ounce of prevention is worth a pound of cure

Posted by Dawn Lomer in on November 6th, 2013

The average fraud lasts 18 months before being detected and can do serious damage to a company’s bottom line.

According the ACFE’s Global Fraud Study, the median loss caused by the occupational fraud cases was $145,000 and more than 22 per cent of them caused losses of at least $1 million. Based on the numbers in its report the ACFE estimated the potential projected global fraud loss as more than $3.7 trillion.

Fraud Prevention Tips

This global problem has sparked the ACFE to designate this week as International Fraud Prevention Week and we’re taking the opportunity to provide 12 tips to help companies avoid becoming one of the statistics above.

  1. Conduct background checks on new hires. The most dangerous frauds are those committed by upper management because they are typically the largest. The more sensitive the job or the higher the position, the more detailed the background check should be.
  2. Foster an atmosphere of open dialogue and encourage employees to bring any concerns forward. Ensure every manager has an open-door policy and communicates it frequently to employees.
  3. Guarantee no retaliation for reporting wrongdoing and spread this message far and wide. Demonstrate a commitment to non-retaliation and deal severely with anyone who breaks this rule.
  4. FREE Investigation Report Template

    Prepare thorough, consistent investigation reports with our free report template.

    Download Template
    When training employees, talk about the company’s values and code of conduct. Consider bringing them up during job interviews to expose new hires to the company’s ethics culture before they event start.
  5. Discipline, prosecute, and follow up on fraud. If a fraudster is working for you, it’s probably because he or she has succeeded in getting away with it before. When hiring, call references and ask former employers about a candidate’s honesty and integrity.
  6. Require that each employee take his or her full vacation time allocated. The person filling in for the vacationing employee is in a good position to notice any irregularities or fraud schemes.
  7. Provide anonymous reporting mechanisms, such as an employee fraud hotline, complaints website and email address for complaints. Since more than 40 per cent of frauds are reported by tips or anonymous information, this existence of these reporting mechanisms should be communicated widely and often.
  8. Establish clear and easy-to-understand ethics standards from the top down. Have an employee code of conduct that clearly outlines these standards and keeps the rules from becoming arbitrary.
  9. Trust, but verify: conduct independent checks on accounts, using audits, surprise check-ups, inventory counts, or other procedures to verify compliance with policies and procedures, as well as accuracy.
  10. Segregate duties of employees who handle accounting duties. Separate accounts receivable and accounts payable functions. The person who has custody of the checks should never have check signing authority. The person opening the mail should not record the receivables and reconcile the accounts.
  11. Control the receipt of bank statements and other sensitive documents, either using a separate post office box or address. This is especially important in small companies where there may not be enough staff to properly segregate accounting duties.
  12. Require that each employee take his or her full vacation time allocated. The person filling in for the vacationing employee is in a good position to notice any irregularities or fraud schemes.

Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.