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Commercial Fraud Prevention

It’s no longer news that we’re experiencing an economic crisis. Many businesses are focused on survival rather than growth, but that doesn’t mean that fraud risk can be ignored.
Now, more than ever, companies can’t afford fraud losses. In fact, just a small fraud could cause an already weakened business enterprise to fail.

As we all know, millions of employees are currently under tremendous financial pressure.

Financial Pressure is one of the three elements in the “Fraud Triangle,” which also includes Opportunity and Rationalization. During tough economic times this increase in financial pressure, and the corresponding ability to rationalize inappropriate behavior, exposes companies to increased fraud risk.

Employers must therefore be diligent about limiting the opportunity of their employees to commit fraud and must implement a comprehensive fraud prevention and detection program. The good news is that many controls can be implemented quickly and inexpensively.

Following are three easy safeguards you can implement to help protect your business from fraud:

1. Tone At The Top – This is the easiest step to take and the least costly, because it’s FREE! Every company should have a fraud awareness policy. Management should openly discuss fraud prevention and detection at staff meetings, orientations for new employees, etc.This approach lets employees know that management and other employees are educated and thinking about fraud and are watching for inappropriate behavior! Often, this alone is enough of a deterrent to prevent a potential fraudster from misappropriating company assets.
2. Let your employees know you have a “zero tolerance” for fraud and embezzlement and will not hesitate to prosecute offenders. Instances of theft and fraud diminish greatly when potential offenders know the potential reward will not be worth the risk of imprisonment. When it is generally known that termination is the only potential consequence of fraud, a company is virtually begging to become victimized.
3. Whistleblower Hotline – Fraud is commonly known or suspected by employees other than the fraudster. Sadly, these “potential witness” employees often do not report what they know because they are unsure whether or not the behavior rises to the level of fraud, they are unsure to whom they should report the problem, or they are afraid the fraudster and/or management will retaliate against them for reporting fraud. A whistleblower hotline provides a mechanism for employees to anonymously report suspicious behavior and suspected fraud.Education and training regarding use of the hotline, examples of types of behavior to report, etc., should be required education for all employees. They should be assured that each and every tip will be investigated quickly and quietly, management will not know the source of the tip, and that there is no possibility of retribution against the tipster.There are many companies who administer fraud or whistleblower hotlines for a reasonable fee. Because over half of frauds are discovered as a result of some type of tip, this is money well spent.
4. Background checks for ALL employees – To quote the popular television psychologist, Dr. Phil, “The best predictor of future behavior is past behavior.” For that reason, it is important that background checks be performed for all employees. Background checks cost very little but can provide valuable insight into the potential employee’s past criminal activity, litigation, finances, credit, and more.Permission must be obtained from the candidate in order to check credit, etc., and candidates with something to hide rarely will consent to a background check – they will simply move on to another company which doesn’t require background checks. In this situation, merely having a policy requiring background checks is enough to protect the company from potentially dishonest employees!

These are just four of the many fraud prevention controls that should be in place at every business. Implementation of a comprehensive fraud prevention plan is vital to the financial health of your business. Don’t wait untill it’s too late. Fraud CAN happen to you!