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Fraud: Don’t let it happen to you

Upset woman
Mekorma Sales Jan 25, 2019 AP Best Practice

As you read this blog post, a fraudster could be stealing from your organization. Before you run off to catch them, let’s talk about their characteristics and how you can avoid being ripped off.

Firstly, there are so many statistics out there on the percentages of companies and organizations that fall victim, the average amount of money that is stolen and how often it occurs. Let’s all agree it happens much too frequently and no one is immune.

Experts say that theft is an addiction based on uncontrollable greed. Fraudsters make an ethical choice to steal, but those ethics are subjective and situational. Sometimes individual ethics clash with those of the organization. A fraudster will always find a way in their mind to justify their theft.

Secondly, fraud can be perpetrated by anyone in the company, but typically it’s someone who is trusted and has tenure. Their handiwork can spread over years because the perpetrator is not stealing in one lump sum; they are defrauding like a slow trickle of water.


Signs of a potential fraudster

  1. Refuses to take a vacation and/or works unusually late hours in the office.

  2. Presents drastic changes in lifestyle, spending

  3. Postpones audits and reviews consistently.

  4. Is uneasy about sharing details of their work.

  5. Has an unusually close relationship with a vendor or customer

What can you do to thwart attackers?

  • Don’t share passwords to business applications and change your passwords frequently. It might be that one time you forgot about sharing a password before you went on vacation.

  • Upgrade your business software and use it. Integrate your systems and never forget to report and reconcile.

  • Adopt a payment approval process where two or more signatures are required based upon certain dollar amounts and checkbooks. Use encrypted signatures. Consider software that has these features.

  • Mandate company-wide ethics training. You can design it on your own or use a third-party consultant.

  • Set up a hotline for employees to report fraud anonymously. Employees are often concerned about reprisals.

  • Document disciplinary measures and enforce employee sign-off. Sometimes the weight of a legal document may make employees think again.

  • Inventory all company credit cards and consistently monitor activity. Set account limits. Mandate that every expense report includes itemizations and original receipts.

  • Depending upon your company size, don’t let one employee have control over all financial matters. Split up duties or rotate them, so that one employee can’t hide their activities. It’s all about the segregation of duties.

  • Ensure that only one or two employees have control over the vendor master list, as mentioned in our Five Important Vendor Master Data Considerations blog post. Know your vendors!

  • Get expert help. If you are uncertain about how to create a plan or find the signs, be sure to find consultants who focus on internal fraud. Initial investment will likely be less costly than future losses incurred.

These are some basic tips to get you started. It’s not an exhaustive list but will steer you in the right direction.

Fraud can occur at any sized company or organization, in any industry, and regardless of whether it’s public or private. Typically, the risk is higher for smaller organizations. Everyone wants to think their employees are honest and trustworthy and while that’s largely true, there are always bad apples working on doing you harm. Watch out for them and protect your organization!

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