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Who You Gonna Call? Fraud Busters!

Wouldn’t it be nice if busting workplace fraud was that easy? Unfortunately, as the ACFE reported, fraud goes on for a fairly long time before it’s detected – the average is 18 months.

Posted by Joe Gerard on January 19th, 2011

Wouldn’t it be nice if busting workplace fraud was that easy? Unfortunately, as the ACFE reported, fraud goes on for a fairly long time before it’s detected – the average is 18 months. Company managers committing fraud was identified as the fastest rising type of fraud case in 2010 according to KPMG’s Fraud Barometer. Other types of fraud that increased throughout the 2010 included money laundering, tax fraud and tougher cases that involved the use of new technology. Both companies and the public are vulnerable to corporate fraud. Busting fraud, or at least, busting it sooner, is possible. Here are some tips to help you become your own fraud buster:

1. Division of Duties

There are some instances where companies make decisions that open the doors to fraud. One of those decisions is the division of duties and the assignment of job-related tasks. Sometimes, employees might be put in charge of too much, making it challenging to identify fraud. The Internal Auditor” article, “Simplifying Segregation of Duties,” suggests:

“If internal control is to be effective, there needs to be an adequate division of responsibilities among those who perform accounting procedures or control activities and those who handle assets. In general, the flow of transaction processing and related activities should be designed so that the work of one individual is either independent of, or serves to check on, the work of another. Such arrangements reduce the risk of undetected error and limit opportunities to misappropriate assets or conceal intentional misstatements in the financial statements.”

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2. Paranoid People

Are any employees acting unusual lately? There are a few different clues your employees can leave behind that indicate that something’s up. Keep an eye open for the following indicators:

  • Lavish expenditures and living beyond their means. Remember the story of the $6000 shower curtain?!
  • A need for money- many blame the recession for being cash-strapped, perhaps they are in financial trouble and turn to fraud to get the funds.
  • Never take a sick day, a vacation day and they constantly need control over certain functions- not letting people in signals that the employee is up to something.

3. Red Alert 24/7

Your employees need direction. In the book “The Essentials of Corporate Fraud” by well-known forensic accountant, Tracy Coenen, she states:

“One of the key red flags of fraud within a company is operating in ‘crisis mode or ‘fire-drill mode’ on an ongoing basis. This is particularly dangerous because no one within the company ever has a chance to see what ‘normal’ operations look like. How would an employee be able to flag something as unusual when all operations are frenzied?”

4. Understand How Fraud Works

Sometimes you have to think like a fraudster in order to bust fraud. Stay up to date on current and developing fraud schemes and trends. Do some research to find out how employees in other organizations are got away with fraud. Knowing the vulnerabilities within your company makes it easier to cut off the opportunity for fraud before fraudsters get a chance to take advantage of it.

A few more tips I’d like to offer are:

  • Watch who you hire- Even though most people who commit fraud in the workplace have no prior history of committing fraud, look for other signs and go with your gut.
  • Take tips seriously- Tips from employees remain the number one source of identifying fraudulent misconduct in the workplace.
  • Anti-fraud program- Develop policies and training to let employees know that the workplace is monitored for fraud and there are consequences for fraudulent actions.

Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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