6 Pillars of an Effective Fraud Prevention Program

- Wednesday, November 09, 2016



Fraud is enormously detrimental to Australian organisations, with KPMG putting the average cost of each case in 2015 at $1.4 million. 

There can be a number of reasons why an employee commits fraud, such as personal financial pressures, personality traits, rationalisation, and opportunity. Since it’s fairly impossible to control other people’s personalities, thoughts and problems, the best thing you can do to fight fraud is to reduce the opportunity for it to happen in your organisation in the first place. 

According to research by the Association of Certified Fraud Examiners (ACFE), where anti-fraud controls are in place, detection of fraud occurs up to 50% quicker, and losses are reduced by 14% to 54%. 

So let’s take a look at six ways to prevent workplace fraud.
1. Create a positive workplace culture
In a positive and ethical culture, fraud will have little place to sprout and grow. Some of the elements to consider include:
  • Transparency, open communication and an emphasis on good relationships.
  • Clarity around workplace structure and job responsibilities. 
  • Regular training and development for staff. 
  • Zero tolerance for fraud and dishonesty.
  • A Code of conduct that everyone signs. 
  • Clear policies and procedures manuals. 
  • Appropriately rewarding employees and treating them fairly. 
2. Workplace security
Premises and data security are always important to reduce crime such as burglary, vandalism and identity theft. Security procedures such as restriction of access to data and resources also helps to reduce fraud risk – such as locking of cupboards, filing cabinets and safes, and using IT controls such as logins and passwords. 
3. Separation of duties and strong controls
Business transactions, especially financial ones, should be split up into tasks that are carried out by different people. For instance, it shouldn’t be left up to one employee only to receive, count and record cash and take it to the bank, without any checks and balances. As well as that, all cheque and online payments should require at least two authorisers or signatures. 
4. Good recruitment practices
It can be so easy to employ a person based on a resume, an interview and a reference letter, without doing any real background checks. Past employment and police checks and contacting referees can all contribute towards getting a better picture of potential employees.   
5. Monitoring and surveillance
According to the ACFE, losses were lower in cases where fraud was detected through surveillance, monitoring and account reconciliations than through accidental discovery. 
Other examples of good surveillance include regular internal audits and annual independent external audits, and strong staff supervision that involves checking for errors and approving transactions. 
6. Fraud awareness training and reporting
Many business owners, managers and employees may not be very aware of fraud risk. Training allows for learning about fraud and its impacts, how to prevent and detect it, and where to report it. 

The longer fraud is allowed to go on, the greater the losses to the organisation. It’s important to develop strategies for reporting suspected fraud, such as anonymous hotlines. The ACFE states that organisations with reporting hotlines were “much more likely” to detect fraud than those without. 

At Wise, we understand the need for organisations to have robust fraud prevention strategies in place, and we offer a whistleblower hotline service to help enable the reporting of suspected fraud. Get in touch if you’d like to know more. 


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