Fraud Detection Methods That Will Make You a Hero - Whistleblower Security

10 fraud detection methods that will make you a hero!

10 fraud detection methods that will make you a hero!If someone is behaving badly, somebody else usually knows. 

Fraud costs everyone more if its ignored, and your organization is not immune from it, no matter what you might think. The ACFE's Report to the Nations states that the median loss caused by fraud was $150,000 - if you're a small business, that could spell disaster. 

Fraud does not discriminate. From hospitals to banks, from non-profits to governments, fraud can hit any organization.

Here's a quick list of ways to improve your fraud detection:

Use a Hotline:
By far, tips are consistently the most common fraud detection technique. The numbers are high - over 40% of all cases in the ACFE report 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. Fraud can be observed by contractors, vendors, customers, and members of the public. If your fraud tipsters can access your tip line via phone, email, mail, fax, 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 The Hotline:
Third-party hotline providers use call center agents who are trained in empathetic and investigative techniques. They are also available for taking calls 24/7, and in any language globally. An internal system where employees are required to call into an internal phone number is limited to what language the call taker speaks (if the company is global), and when they are available to take the call. Companies need to take into account vacation and sick days.

Training Your Employees:
Train all your employees on what fraud is, what to look out for, and how to report it. Frauds will differ from industry to industry. If you're in the healthcare industry, then you need to look out for false billing of services, or incorrect diagnoses reporting. If you're in the financial industry, you'll need to look out for mortgage or securities frauds. If you have a tip hotline, your employees need to know about it and how to use it.

Train Again:
Well if you're anything like me, a little repetition doesn't hurt. Train your employees regularly on the availability of a hotline, and how and where they can report on any behaviours they think are questionable. You can never train enough.

Protect Assets:
Smaller businesses probably have petty 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. As well, most organizations require employees to have use of company credit cards. It can be very tempting to misuse these. For example, if you are a manufacturer of a food product, you probably have delivery drivers eating up miles on the road to make their deliveries. The organization will issue credit cards, for use on truck gas, lodging, food, when on the road. A card like this could easily be used for personal use. Get receipts for every transaction and compare with on-road schedules.

Fraud Triangle:
Most occupational fraudsters exhibit certain behavioural traits that can be warning signs of their crimes. They may be living beyond their means, suddenly owning new houses or cars. Also, they may have more than unusual close associations with vendors or customers.

Reduce Opportunity:
Internally in your organization, you can help reduce the opportunity for occupational fraud. Try to segregate sensitive duties or tasks between more than one employee. Put internal controls in place to regularly track or audit these sensitive duties. But most important, develop a culture and environment of integrity. An employee is less likely to commit a 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:
By implementing a spot audit program and conducting random audits on particular areas where fraud could occur, you can keep ahead of any possible threat, and if you do find any concerns, you can immediately conduct whatever investigation you need to rectify any issues.

Policies:
Having a policy, then filing it away, isn't enough. Your policies need to be kept fresh, updated, and available organization-wide. These policies will instruct how to manage conduct, ethics and expected behaviour. Policies should cover where and how your employees can report on any concerns they have, and what they can expect as follow-up action when and if they come forward.

Fraud can be preventable. You just need to take proactive measures. Incorporate a strong compliance program that includes an ethics reporting system. And empower your employees to speak up when they see wrongdoing. Learn more about how you can prevent fraud in your organization by downloading our fraud prevention checklist.

Use a Hotline

Fraud Prevention Checklist

photo Amanda Nieweler

Amanda Nieweler

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.