The driving factors of potential fraud in sales and how to prevent it

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The Covid-19 pandemic increases the threat of fraud more than ever before. Where sales have become one of the business process areas that are exposed to the threat of fraud. How does fraud occur in sales and what can we do to prevent it?

In a webinar titled ” There is always somebody ready to take unfair advantage of a crisis situation ” one of the speakers, Raphael Kiess, the Managing Director of Alvarez & Marsal Inc., said that the potential fraud in sales during this pandemic can be reflected by the concept of the fraud triangle, which is rationalization, pressure, and opportunity.

Fraud Triangle of the Pandemic

An individual who commits fraud during the current crisis rationalizes or justifies their actions as something that is natural or needs to be done to survive.

“They might say they do it for employees, for families, and even for the community. From a psychological point of view, these are all strong reasons for someone to commit fraud,” Raphael explains.

The condition of pandemic has pushed many companies to run their businesses remotely or what we know as Work From Home (WFH). This condition automatically weakens control compared to usual business. This becomes an opportunity for someone to commit fraud. He also reminded us that the weaker control could also be used by individuals in the company to conceal past failures.

Given the pandemic situation that is pushing a massive lockdown around the world, many companies are now on the verge of bankruptcy. This condition provides great pressure on companies as well as motivation for them to commit fraud.

How does fraud in sales occur and how can we prevent it?

So, how do the perpetrators commit fraud? Raphael shared his experience as an investigator, he stated that if he became a perpetrator, he would manipulate or falsify sales data, including falsifying the sales process documentation. Of course, the fraudster would also be aware of potential whistleblowers. As auditors and coworkers may become potential whistleblowers.

The important lesson we can take from this webinar session is that a company needs to implement tighter internal controls during uncertain time. No less important is also implementing a whistleblowing system as an early fraud detection tool.

The whistleblowing system requires the company to raise awareness among their stakeholders to recognize the characteristics and red flags of fraud, as well as how important it is for the stakeholders to take part to mitigate the fraud by reporting their findings.

Integrity Indonesia, as a company that has more than seventeen years of working in the field of compliance, has extensive experience in providing whistleblowing services for clients from various business backgrounds. Through the Canary Whistleblowing System, Integrity presents a combination of several reporting channels that are centralized on the website application thereby increasing our client’s accessibility to reports, while still ensuring the anonymity of the reporter. Contact us for further information about Canary Whistleblowing System.