Workplace fraud is a big problem today. It’s when money, information, and/or other items are stolen by an employee. Different methods of fraud include skimming, larceny, and physical theft.
According to the Association of Certified Fraud Examiners' 2014 Report to the Nations, about 5% of an organization's gross annual sales are lost to fraud. The median loss caused by a single case of occupational fraud is $145,000, and 22% of occupational fraud cases cost more than $1 million. The longer a fraud goes undetected, the more the victim organization loses.
Establishing an ethical culture in the organization is one of the most important anti-fraud strategies.
“An ethical culture promotes honesty, integrity, respect, responsibility and accountability,” wrote ethics professor Dr. Steven Mintz in a blog post. “These values lead to trustworthiness in business and a framework by which all business actions and decisions should be evaluated.”
At the same time, everyone should be aware that dishonest acts will be punished, says Forensic Strategic Solutions executive Kelly Todd. “The opportunity to commit fraud is easier to rationalize when employees believe their wrongful acts will go undetected and unprosecuted.”
Here is a fraud prevention checklist for the workplace.
- Employee Training. Use on-going training to reinforce anti-fraud policies. What’s most important is that employees speak up when they see that something isn’t right in the workplace. Teach them common behavior traits of inside fraudsters, including living beyond their means, unnecessary long hours, medical concerns, signs of drug or gambling addictions, and close associations with vendors or customers.
- Tips Line. According to ACFE, tips are “consistently and by far” the most common detection method. Organizations with a hotline are much more likely to catch fraud by a tip. A hotline can reduce the median loss from fraud by 40.5% and reduce the duration of a fraud by half.
- Surprise Audits. Scheduled internal and external audits are critical business processes. But, according to a report by the Anti-Fraud Collaboration, surprise audits are the most effective when it comes to fraud prevention. Research has shown they can reduce the median loss from fraud by 43.4% and the median duration of fraud by 50%. Remember, fraudsters will cover up their wrongdoings if they know auditors are coming.
- Data Monitoring. Data monitoring keeps track of content and changes to company files. ACFE says this is an often overlooked but effective anti-fraud control and can reduce fraud losses by almost 60%. At the same time, no single employee should ever be responsible for any one function.
- Document Management. A comprehensive Document Management Policy helps to keep confidential information organized, compliant, and safe from creation to destruction. Documents are identified, labelled and securely stored until they are no longer needed.
- Information Destruction. To prevent any compromises of information, partner with a reliable information destruction partner that has a secure chain-of-custody for both paper and e-media. Document destruction best practices should include locked containers, on or off site secure destruction using cross-cut shredding technology, and a certificate of destruction after every shred.
More than 40% of data breaches happen inside of businesses due to simple human error.