The 5 Things About Fraud That You Need to Know
Every company combats fraud. If your organization hasn’t yet been a target for fraud, it’s probably just a matter of time. Whether it’s internal embezzlement and purchasing fraud, fraudulent financial reporting, or attacks on the AP department, fraud represents a significant financial risk.
In the modern world, fraud is a hazard of doing business. But you can take steps to help secure your company so you can prevent fraud or catch it soon enough to prevent financial disaster. And in the fight against fraud, knowledge is one of your best tools.
1) Fraud Can Happen Internally
No one wants to think about fraud happening internally. We’d far rather approach employees from a position of trust rather than suspicion. However, KPMG’s 2016 Global Profiles of the Fraudster report found that “65 percent of fraudsters are employed by the victim organization and a further 21 percent are former employees.” Not only that, but 38 percent of the fraudsters who were current employees had worked there for more than six years. Most fraudsters are pretty high up in the company, too. About 34 percent of fraudsters are executives or non-executive directors and 32 percent are managers.
2) Fraud Happens In Groups
We often think of fraud happening when one person decides to steal from a company. But fraud is almost twice as likely to be perpetuated in groups than by a single person. Larger groups of five or more people also tend to do more harm to a company’s finances than one person or a smaller group. This is largely because it’s easier for fraudsters to circumvent controls if they’re working in groups. Especially if the group includes fraudsters working both outside and inside the company.
3) Anti-Fraud Controls Aren’t Enough
Most companies aren’t ignoring fraud. They’ll have some controls in place such as internal audits and anti-fraud processes for reporting suspicious behavior. But fully 61 percent of the 750 fraudsters that KPMG surveyed were still able to exploit weak internal controls. And even when controls are strong, they’re not always enough. Fraudsters at the executive level and those working in groups are often able to override or evade anti-fraud controls. That doesn’t mean you stop strengthening your internal controls. It just means they’re not the only thing to focus on.
4) Constant Vigilance Is Essential
You do need strong anti-fraud controls in place. They’ll weed-out less accomplished fraudsters and make it harder for a single person to steal from your company. But you’ll also need to take additional steps to catch fraudsters who are able to get around internal controls. Of the fraudsters that KPMG surveyed, 44 percent were caught because of a tip, complaint, or formal whistle blowing hotline. Creating a culture where employees like your company and are comfortable reporting suspicious behavior is definitely to your advantage. Also, remember to reassess risks regularly since the business landscape changes rapidly.
5) Fight Technology With Technology
More and more fraudsters, including cyber fraudsters, are using technology to steal from companies. But you can also use technology to stop them. Tightening anti-fraud controls and making sure they’re followed across the company is a big step in preventing fraud. Data analytics and business process automation software can help make that happen. BPA systems standardize controls and include processes to automatically enforce company policy. You can also customize them to alert you to specific kinds of suspicious activity. Contact NextProcess today for more information or to schedule a demonstration and learn first-hand how BPA software can help your company.