10 Fraud Recovery Techniques You Can Use Today!

10 Fraud Detection Techniques You Can Use Today!

Fraud Recovery: 10 Techniques for Instant Success!

No organization wants to wake up to find itself the center of unexpected liability or unwelcomed scrutiny. That vulnerability is more significant with the increased occupational fraud stimulated by today's challenging economy, especially if your resources are stretched thin.

Fraud costs everyone more if ignored, and your organization is not immune from it.

While the ACFE's Report to the Nations on Occupational Fraud and Abuse states that financial statement fraud is the most costly, any type can be disastrous, especially for small businesses.

Let’s discuss the importance of fraud recovery and how easy techniques can protect your company.

Table of Contents

Key Takeaways

  • Fraud detection is the process of identifying suspicious behaviour within an organization’s financial transactions. This process can use various techniques but typically involves a combination of data analysis, monitoring systems, and AI learning.
  • All companies should have fraud detection and prevention tools and measures in place to protect their organization and clients or customers and avoid regulatory penalties and non-compliance issues.
  • Your organization can implement many fraud recovery techniques today, including hotlines, training employees, spot auditing, and policy revision.

What is Fraud Detection?

Fraud detection is the process of identifying suspicious or abnormal behaviour within an organization’s financial transactions. This behaviour often means obtaining money or valuables through false, unauthorized methods. Fraudulent activity is a significant business risk that may lead to financial losses, so having proper processes can help prevent this and put safeguards in place. Additionally, since our world has become more integrated with technology, online fraud is a rising issue that needs special attention.

Detection and recovery are for any type of business and use various techniques and technologies to identify suspicious activity and fraudulent transactions and block the success of fraudsters. This process can use many methods, including data analysis and monitoring systems.

  • Data analysis: This approach uses data to identify patterns and anomalies in financial transactions. This can include spotting sudden increases in the number of transactions or an unusual change in the types of transactions occurring. Consistent evaluation of these figures can help organizations question certain activities and step in before it causes harm to the business or their customers.
  • Monitoring systems and AI machines: This technique uses sophisticated software to detect real-time suspicious activity. It can also use AI algorithms to learn and predict high-risk behaviours. The system can flag large or out-of-the-ordinary financial transactions and alert relevant stakeholders of potential fraud.

Types of Fraud

Suspicious activity can show up in various forms and differ from business to business. Generally, fraudsters have strategies to adapt these behaviours to virtually any industry. Here are common types of fraud you may encounter:

  • Financial statement fraud: This involves manipulating an organization’s statements to make the company appear more profitable than it is.
  • Asset misappropriation: When unauthorized people use or steal a company’s assets, like cash, inventory, or equipment.
  • Payroll fraud: Manipulation of a company’s payroll system. This behaviour can include creating fake employees or falsifying time sheets.
  • Insider trading: Occurs when people use non-public information to make trades in the stock market to their advantage.
  • Money laundering: Obtaining money from illegal means, concealing its origin, and moving it to appear legal.
  • Cybercrime: Using technology to hack into a company’s computer system or use malware to steal sensitive information from your customers.

The following are examples of fraud that are especially prevalent in online spaces:

  • Stolen credit card purchases: When criminals steal credit card numbers and use them to buy your company’s services or products. This activity can be rampant with online transactions.
  • Fake accounts: Using phony information and stolen IDs to create new accounts with your company. Secure and rigorous signup policies are essential to close the doors to malicious agents.
  • Return or chargeback fraud: This can occur when legitimate cardholders contest a purchase with ulterior motives or fraudsters take advantage of your return policy to get money back, receive free items, or deplete your inventory.
  • Affiliate fraud: Bad agents who take advantage of marketing opportunities with your organization. This can include sending malicious traffic to your site or using bots to gain rewards.

Why Should Organizations Invest in Fraud Recovery Tools and Techniques?

Simply put, fraud costs organizations more if ignored. All companies should have fraud detection and recovery software and techniques, especially if your business is online. Not only does this suspicious activity lead to financial loss for your business, but it can also jeopardize your customer’s privacy and security if there’s a data breach or malicious agent at work. Additionally, organizations can face regulatory violations or non-compliance issues beyond the direct financial impact. Public organizations face penalties for failing to meet SEC obligations , and non-profit entities could lose government funding.

Challenges of Fraud Prevention and Detection

Like any organizational process, there are implementation challenges and considerations. These can include the following:

  • Fraudster techniques are ever-evolving as they get more creative to work around heightened security measures. This means that your efforts to prevent and detect suspicious behaviour also need to change. Your risk team must be dynamic for this reason.
  • While data collection is essential to mitigate fraud, too much can become cumbersome for your customers. For example, aggressive ID verification every time someone logs in may backfire on you.
  • False positives (blocking legitimate clients) can lead to frustrations and lower customer experience and satisfaction. False positives include declining a genuine purchase, locking out a user from their account, or flagging suspicion where there is none.

Fraud Recovery Techniques Companies Can Implement Immediately

Fraud prevention and recovery techniques should be adaptive and predictive to get the most comprehensive understanding of fraud risk within your organization. As outlined above, this can include data analysis and real-time machine monitoring. Regardless of the combination of strategies you use, your fraud prevention tools and the process should be able to:

  • Identify and stop fraudulent transactions quickly to improve customer experience and security and protect your organization from financial losses.
  • Organize data from all departments to be subject to analysis.
  • Consistently monitor all spaces where transactions occur and accurately identify high-risk behaviours.
  • Make data available to relevant stakeholders to optimize the investigative process.
  • Inform action — whether it’s to prevent, stop, or reprimand fraudulent activity and its participants.

Here are some fraud detection and recovery tools and strategies that organizations can implement today:

Use a Hotline:

By far, tips are consistently the most common fraud detection technique. In fact, employee tips are the most common method to detect any unethical behaviour in the workplace. In the Report, over 40% of all cases were detected by a whistleblower tip. This is more than twice the rate of any other detection method. And employees accounted for nearly half of all tips that led to the discovery of fraud.

Multiple Reporting Mechanisms:

Offer multiple reporting mechanisms. Your employees aren't the only people with eyes and ears on your organization. Contractors, vendors, customers, and members of the public can also observe suspicious activity. If your fraud tipsters can access your tip line via phone, email, and web, all parties have different options open to them, and they'll be more inclined to choose their method and make their report.

Outsource "Third-Party" Hotline:

Internal systems often sit behind firewalls. If you have an internally run system, and your employees would prefer to use it at home, there’s a chance they won’t be able to access it. An external third-party whistleblower hotline increases accessibility to anyone who needs it.

Training Your Employees:

Train all your employees on the definitions of fraud, what to look out for, and how to report it. Frauds will differ from industry to industry. For example, if you're in the healthcare industry, you must look out for false billing of services or incorrect diagnosis reporting. If you're in the financial sector, you'll need to pay close attention to mortgage or securities fraud. If you have a tip hotline, your employees need to know about it and how to use it.

Train Again:

Train your employees once or twice annually on how and where they can report any questionable behaviours that may go against your corporate ethics and culture. You can never train enough — every opportunity to educate staff on fraud and unethical behaviour is helpful.

Protect Assets:

Smaller businesses may have cash funds and other cash assets within the office. Put processes in place for handling these — require receipts for everything. Reconcile your petty cash fund before replenishing it.

Additionally, most organizations give employees access to company credit cards. It can be very tempting to misuse these. For example, if you are a food product manufacturer, you probably have delivery drivers using up miles on the road to make their deliveries. The organization will issue credit cards for fuel, lodging, and food when on the road, which personnel could easily exploit for personal gain. In these situations, ensure you get receipts for every transaction and compare them with on-road schedules.

Fraud Triangle:

Most occupational fraudsters exhibit certain behavioural traits that can be warning signs of their crimes. They may live beyond their means, suddenly owning new houses or cars. Also, they may have more than unusual close associations with vendors or customers. According to the ACFE's Report, in 92% of the cases, at least one common behavioural red flag was detected. Understanding these characteristics can make you more proactive.

Reduce Opportunity:

Internally, you can help reduce the opportunity for occupational fraud. With sensitive duties or tasks, try segregating these between more than one employee. Put internal controls in place to regularly track or audit these areas. But most important, develop a culture and environment of integrity. An employee is less likely to commit fraud if they feel like they are a contributing member of the organization and if management also exhibits actions of integrity and trust.

Spot Audits:

You can keep ahead of any possible threat by implementing a spot audit program and conducting random audits on particular areas where fraud could occur. If you find any concerns, you can immediately investigate to rectify any issues.


It isn’t enough to create a policy and file it away. Your policies must be kept fresh, updated occasionally, and available organization-wide. These documents will instruct how to manage conduct, ethics and expected behaviour. Most importantly, it has to be actioned from the top down, meaning that the highest members of your organization should uphold it. Your policy should also outline where and how your employees can report any concerns and what they can expect as follow-up actions.

WhistleBlower’s Ethics Hotline for Fraud Detection and Recovery

While fraud is typically not 100% preventable, there are ways to ensure your organization, clients, and all stakeholders are protected. It’s vital to incorporate a robust compliance program that includes an ethics reporting system and empowers your employees to speak up when they see wrongdoing. Contact us at WhistleBlower Security for more information on our ethics hotline and case management system.

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photo Amanda Nieweler
About the Author
Amanda writes for WhistleBlower Security about ethics, compliance, workplace culture, and whistleblower hotlines. Amanda brings her nearly two decades of risk and compliance experience to the WBS blog where she is dedicated to helping people and companies promote speak-up cultures.

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