While many businesses believe they are doing all they can to counter fraudulent activity, they often lack the latest data analytics, and that could prove costly. Many companies still rely on old-fashioned human intervention to spot potential fraud, but in the modern era they may well be missing a trick. Data analytics are an excellent tool and can prove to be surprisingly cost-effective.

There are actually numerous tests available to help you identify red flags. Take occupational fraud schemes, for example. You can easily compare purchasing rates between vendors and look for discrepancies or search for vendor preference patterns.

Why not check sales prices and margins by customer? If you find unexpected anomalies or unusual pricing, it could suggest an internal fraud involving a member of your staff. Be on the look-out for ‘kickbacks’ too – expense reimbursements or sizeable petty cash withdrawals prior to an important contract being signed. And it’s often useful to focus on the sums involved in cash payments to agents or customers, as round figures can be revealing of suspicious activity.

Some organisations will undertake a very good data matching test by comparing payroll records (name, address, postcode, bank account details) with records on a suppliers’ list. Any duplications will automatically raise concerns.

You might well think that your internal or external auditors will be doing this kind of work, but have you actually checked that they’re making use of the latest data analytics themselves? Of course, it’s also possible for you to invest in the tools yourselves. The important thing is to be proactive and to avoid complacency that might cost your company a lot of money.

Did you know?

  • A typical organisation loses 5% of revenue each year through fraud
  • Smaller firms will usually have far fewer anti-fraud controls in place than larger ones
  • The more authority a person has within a business, the greater the scale of their typical fraud
  • Organisations with specific anti-fraud controls in place reduce losses significantly and detect frauds up to 50% quicker

Source: Report to the Nations on Occupational Fraud and Abuse, 2016, Association of Certified Fraud Examiners

SeeHearSpeakUp delivers whistleblowing and investigation solutions to companies globally. For more information, please visit our website here or contact our team on +44 (0) 1224 625111.

Published in Blog
Monday, 05 March 2018 14:11

How Tolerant is Your Business to Fraud?

As a fraud investigator for over 25 years, I’m aware that most, if not all, businesses will often tell you that they have zero tolerance to fraud. It will say this in most company’s policies and ticks a corporate governance compliance box reflecting that the company will take the strongest enforcement action in order to deal with fraud.

Of course, whilst most companies have implemented zero tolerance policies the reality is that fraud and other types of wrongdoing exist because every business will have their own tolerance to Fraud.

An integral psychological element often found when fraud occurs in business is the fraudster’s rationalization. For example, a fraudster who has committed expenses fraud may try to excuse their behaviour by insisting that they were only taking what they were entitled to as their employer does not pay them enough. I believe that this psychological element is strongly influenced by workplace culture, which plays a fundamental role in the threat of fraud found in the workplace.

I was at a training event within my own firm recently that looked into work and lifestyle balance. The trainer made an interesting analogy regarding how the human body can cope with a lack of sleep only for a certain while before eventually shutting down as the sleep deprivation increases. The same analogy can easily be related to how tolerance to fraud can harm a business. If I was to hold a glass of water in my hand, I can hold it for a minute and it is not a problem. If I hold it for an hour, I will have an ache in my arm. If I hold it for 2 hours, my arm will feel numb and paralyzed. In each case the weight of the glass does not change but the longer I hold the glass the heavier it becomes.

The workplace culture and how it tolerates fraud and other wrongdoing is like the glass of water. Tolerate minor fraud and nothing happens. Tolerate it a bit longer and the fraud will begin to hurt your organisation. Tolerate it longer and your business can be irreparably damaged.

I can recall speaking to a senior manager a number of years ago whilst performing a fraud investigation where I recommended that his business could do with implementating additional fraud controls such as setting up whistleblowing mechanisms and providing anti-fraud training to encourage staff to raise concerns within the business. The senior manager acknowledged the recommendation then advised me that it was all very well encouraging staff to speak up about fraud but the last thing he wanted to do was to deal with matters that only brought his business bad news, hardly a testament to zero tolerance .

Implementing zero tolerance policies are all well and good but words need backed up by actions. Those organisations should take time to consider how they can demonstrate this zero tolerance approach in their business.

SeeHearSpeakUp delivers whistleblowing and investigation solutions to companies globally. For more information, please visit our website here or contact our team on +44 (0) 1224 625111.

Published in Blog