Fraud in Business: Are These Fraudsters Operating in Your Workplace?

Posted  September 22, 2016  by  Shred-it

business fraud prevention

Recent research has shown that a new type of fraudster called a ‘fake user’ is having a field day in the workplace.  

The fake user is committing registration fraud, which is one of many types of fraud in business today.

A typical organization loses 5% of revenues a year to fraud. According to the 2016 ACFE Report to the Nations on Occupational Fraud and Abuse, the total loss caused by fraud cases in a recent study was over $6.3 billion with an average loss per case of $2.7 million.

Here’s a closer look at 5 common fraudsters... as well as strategies in business fraud prevention to help stop them and others:

Fake users: User growth in an organization has become a key indicator of financial growth - but registration fraud by fake users has also started to increase. A report by Ponemon pointed out that fake user accounts are notorious vehicles for abuses such as spam, identity theft and account takeover. The research showed 82% of companies face some issues with fake users in their systems.  

‘Concealers’: In 95% of cases in the ACFE study, perpetrators took steps to conceal a fraud. Creating fraudulent physical documents was the most common method. These fraudsters also altered physical documents and transactions.

Payment Fraudsters: Payment fraud is any fraud that falsely creates or diverts payments. According to the Association for Financial Professionals, nearly 75% of American businesses were targeted for payment fraud last year.

‘Fake’ Employees: Security experts have issued warnings about professional fraudsters who seek out organizations with weak fraud controls in order to apply for work – and commit fraud.

High-Level Employees:  Higher-level employees generally have greater access to an organization’s assets and may be able to override controls, according to an earlier ACFE fraud report. When an owner/executive committed the fraud, the median loss was $703,000 – more than four times higher than managers ($173,000) and nearly 11 times higher than employees ($65,000).

How can an organization stay vigilant about fraud protection in the workplace?

  • Provide an anonymous fraud hotlineHotlines provided the most common detection method (39.1%) in the 2016 ACFE study. Set up telephone, email, and web-based communication for tips.  
  • Train employees. The importance of training has been identified in many major industry reports. Teach employees how to recognize fraud; also, communicate what is expected in workplace ethics and behavior.
  • Do surprise audits. Regularly examine financial statements and anti-fraud controls, but use the element of surprise. When it comes to business fraud protection, surprise audits helped reduce duration of schemes and overall losses, said ACFE.
  • Keep track. Utilize data analytics and monitoring in order to track patterns and identify fraudulent behavior in the workplace. 
  • Have a comprehensive document management policy. A process for identifying, labeling and securely storing confidential information is critical. Access to confidential data should be controlled.
  • Provide secure destruction of confidential information. Partner with a professional information destruction company that has a secure chain of custody for paper and hard drive destruction services.

A Clean Desk Policy is another fraud reduction strategy that cleans up employee work areas – to remove opportunity from fraudsters.

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