3 Tips on Fraud Prevention in the Work Environment

There is no discrimination when talking about fraud and theft cases in the workplace. The size of companies does not matter. According to the 2014 Nation on Occupational Fraud and Abuse report, companies generally lose 5% of their annual revenue due to employee fraud.

Who would have thought that an employee who we trust and did not have a criminal track record was capable of committing such crime? Basically, there are three common reasons over the occurrence of a fraud known as ‘triangle fraud.’ They are motivation, opportunity, and rationalization. The last element is the most difficult to minimize because it is personal. In essence, the prevention of fraud is done primarily by controlling opportunities and demotivation.

In the following, we summarize, from a variety of sources, some of the initiatives that businesses can undertake.

1. Know your employees

Start with the recruitment process by doing a background check on candidates. From the background check, the company can make sure the candidate does not have an alarming track record. Maintaining good relationships with employees is also important. The fraudsters often show signs of behavior that can clue to the risk. Observing and listening to employees’ opinions help companies identify potential fraud risk. Good relationships also help companies address internal problems. For example, there may be employees who feel underappreciated by their employers or feel angry with their superiors. Such problems could trigger them to conduct fraud.

2. Track internal controls

Internal controls are programs to maintain assets, ensuring company integrity remains enforced, minimizing and detecting fraud. Segregation of duties is an important component of internal control. It is suggested that each employee, as much as possible, avoid multitasking. For example, employee salaries are prepared and authorized by HRD, but the data is input by accounting. Then, the data is checked by management before being transferred to employees. The segregation can help reveal discrepancy.

Companies need to make clear rules regarding internal controls. In addition to the segregation, companies should take security system matter into consideration. For example, create rules where employees must periodically replace their computer’s keywords.

3. Build awareness of anti-fraud culture

As mentioned earlier, the prevention is primarily focused on controlling opportunities and demotivation. Building awareness of anti-fraud is a way to demotivate. Every employee should have knowledge and awareness about fraud and consequences of doing so.

Companies also need to realize that employees are assets against fraud. Based on the ACFE 2014 report, occupational fraud (more than 40%) are generally detected through employee tips. Other sources of tips are vendors, customers, competitors and acquaintances of the fraudsters. Therefore, providing an anonymous whistleblowing system and socializing it to stakeholders is essential.

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