Businesses place a lot of trust in their employees, providing them with access to confidential and financial information. Unfortunately, even with extensive background and reference checks some bad actors can be hired, and they use their positions to perform nefarious activities. Workplace or employee fraud is when employees engage in fraud for their own personal or financial benefit. According to PwC’s Global Economic Crime and Fraud Survey 2022, 31% of the most disruptive fraud was done by an internal perpetrator and 26% was collusion between internal and external actors. Workplace fraud is a problem that cannot be ignored. Fraudulent activities include — but are not limited to — theft, embezzlement, bribery, benefits fraud, and payroll fraud. Company leaders and employees should work together to proactively identify and combat illegal activities within the organization.
Here are six fraud prevention tips and strategies for companies and employees to follow to help protect against workplace fraud.
- Incorporate Surprise Audits
Industries can use proactive or reactive auditing to examine fraud. Job rotation/mandatory vacation policies and surprise audits were two factors that were associated with at least a 50% reduction in both median loss and median duration in certain instances of fraud, making this an important consideration for companies.
- Pay Attention to Information Destruction
When documents have reached their end of life, businesses should dispose of confidential papers by shredding them with a service like Shred-it®.
- Use a Hotline
According to the Association of Certified Fraud Examiners' (ACFE) report on occupational fraud, 42% of all frauds were detected by tips, and more than half of all tips came from employees. Additionally, companies with a hotline detect fraud faster and lose less money than companies that don’t have hotlines.
- Manage Documents Effectively
Two policies that can be effective in document management are a clean desk policy and a shred-it all policy. A clean desk policy helps ensure physical documents are shredded or contained and that all technological devices are password protected each time an employee leaves a workspace. A encourages the regular destroying and securing of all documents to help ensure no confidential information is left vulnerable.
- Active Data Monitoring
Organizations can use technology to detect fraud. The software can analyze data points and create a profile of what fraudulent activity looks like. That profile is used to find suspicious behavior. Monitoring is in real-time, 24/7/365. According to ACFE, proactive data monitoring/analysis reduced the median loss of fraud by 47%.
- Train Employees
Shred-it®’s 2022 Data Protection Report found that even with information security training, 67% of small business leaders (SBLs) surveyed fear that their workforce still does not understand data protection best practices. Companies can help employees look out for suspicious activity in data and across company activities by offering training for new hires and at regular intervals afterwards. Employees engaging in fraud might start living a lifestyle that doesn’t match their salary, have unexplained financial transactions, or have several complaints filed against them by fellow employees.
Learn how Shred-it®’s services can be part of your anti-fraud controls.
Why is it important to prevent workplace fraud?
With companies globally losing approximately 5% of their revenue to employee fraud and occupational abuse each year, it is critical to control who has access to certain information to prevent fraudulent activity.
What are the consequences of workplace fraud for employees?
Depending on the case, companies can consult internal legal counsel or human resources to discuss which steps to take, such as termination or legal actions.
How can businesses prevent employees from committing workplace fraud?
Businesses can try to prevent workplace fraud by limiting data access to necessary personnel and proactively catching suspicious activities.
What should businesses do if they suspect or discover workplace fraud?
If a business suspects or discovers workplace fraud, it should consult a forensic team to investigate the issue.