March marks the 13th annual Fraud Prevention Month in Canada, but despite efforts to raise awareness throughout North America, many businesses are still falling victim to corporate fraud. The majority of respondents in a recent report say their organizations have become more vulnerable to fraud in the past year.
According to the Global Fraud Report 2015/2016 by Kroll, 75% of companies reported fraud incidents, an increase of 14% compared to the previous report.
The most common types of corporate fraud were theft of physical assets (22%), vendor, supplier or procurement fraud (17%), and information theft (15%).
Insiders were the biggest fraud threats. The report showed that 36% of companies were victims of fraud by a senior or middle management employee, 45% by a junior employee, and 23% by an agent or intermediary.
Here are critical fraud protection strategies for the workplace.
- Create a comprehensive information security policy. It should comply with industry privacy laws, and there should be an information security incident response plan that is regularly updated and tested.
- Utilize audits and other fraud detection reviews. Schedule surprise internal audits as well as employee and management reviews. Audits uncover inconsistencies and remind employees that the company is watching, which can help deter fraudulent activity.
- Create a security-aware work environment. Support a culture of security from the top down with senior management leading by example and fair employment practices. This kind of positive environment encourages employees to commit to information security.
- Have a dedicated fraud team with open and on-going communications. Make sure the workforce understands the consequences of fraudulent behavior such as criminal charges and termination.
- Ensure there is a comprehensive Document Management process. Label confidential information with retention schedules including disposal dates. Data monitoring is strategic fraud protection too. Earlier research showed that proactive data monitoring can reduce the cost of fraud by up to 60%.
- Provide on-going security awareness training. The Canadian Fraud Prevention Month campaign urges companies to ‘recognize, reject and report’ fraudulent behavior - a message that's crucial worldwide. Train employees about the behavioral traits of fraudsters – research shows they usually display at least one (i.e., living beyond their means, financial difficulties, or having unusually close associations with vendors). Train employees to spot and avoid internet scams too, such as phishing, fake antivirus offers, and untrustworthy links.
- Utilize up-to-date IT safeguards on all electronic devices. Layered defense includes two-factor authentication, firewalls, intrusion detection systems, content filtering, encryption, and password protection.
- Set up an anonymous tips hotline.Other employees can be a company’s strongest defense. In the Kroll study, a whistleblower was at least partially responsible for exposing 41% of cases of fraud that were uncovered.
- Divide tasks so employees are always working in teams. No one person should manage tasks completely on their own especially in the finance area.
- Embed secure processes into the workplace. Implement a Clean Desk Policy so employees keep their work areas free of exposed confidential data. Partner with a trusted shredding company that replaces open recycling bins with locked consoles, and schedules regular on- or off-site destruction services for paper and electronic information. A Shred-it All Policy will also help prevent fraud.
Learn the most vulnerable areas in your office to reduce your fraud risk.