Fraud prevention is a team sport and as with any team sport, you get out of the team what each member puts into it. I have seen where management checks off the proverbial checklist for fraud prevention on the grounds that they have a department or individual in charge of fraud prevention. Case closed. Right? Wrong. Having one employee or a group of employees in charge of fraud prevention without buy-in or awareness from the majority of employees is not an effective solution; in contrast, this is essentially organizational Russian roulette.
Often, evidence of fraud is witnessed by one or more employees before an investigation is even started. In many cases, the employees I’ve worked with have seen the red flags well in advance of taking any form of action, simply because piecing together the pieces of the fraud puzzle just isn’t in their job description. This is apathy at its finest. Your team must be clear: their responsibilities include reporting any red flags to management immediately via a hotline or another anonymous method so that these instances can be investigated promptly.
Fraud accomplished thru collusion is one of the toughest types of fraud to prevent or detect due to the collective overriding of policies and procedures by multiple employees, vendors or customers. Our goal as organizations is to run lean yet still have effective policies and procedures in place to detect and prevent fraud. A presenting challenge of a lean organization is that it reduces the amount of employees needed to perform a collusive fraudulent act. As such, weaving in lean processes into the fabric of your internal control could mean your organization could be a victim of fraud with as few as two successful fraudsters. Often, organizations do not sufficiently plan for collusion in their fraud prevention and detection controls. Thankfully, there is an antidote.
Across my various fraud investigations, I have found that collusion is often prevented or detected by organizations that take ownership of fraud prevention as a team. It’s at these clients that all players know their part. All employees, vendors and customers understand that integrity is a core organizational value and embrace the company’s stance against fraud. This team culture lowers the perceive opportunity for the fraudsters, which will, in their eyes, increase the likelihood that they would get caught if they move forward with their fraudulent scheme. Regularly, it’s this perception in the mind of the fraudster that deters them from acting out their plans. With a well-trained and fraud-aware team, when a fraud does occur, the team is much more prepared to respond quickly and appropriately before the involvement of any internal audit or fraud prevention group.
Successful fraud prevention and detection organizations also need a quick, easy and anonymous way for their team to report possible fraudster activity. We have seen third party toll-free hotlines used with great success among our client base as a key deterrent in their overall response to fraud risk.
Fraud prevention education and awareness promotion for all employees will lower the perceived opportunity of fraudsters and will also help the team support management in the prevention and identification of fraud. What is your organization doing to accomplish this task?
If you or your team would like to continue a discussion on this or other fraud related topics, please email David Hammarberg, Principal and leader of our firm’s Cybersecurity and Forensic Examination practices at email@example.com.