(This is the third of four posts on this topic)
By Associate Kimberly Creasey
As discussed in part 2 of this article series, tips are the most common way in which fraud is detected. However, additional measures must be taken because it is not sensible to rely on employees or outside individuals to be the only means of fraud detection. Monitoring company activities for fraud must be a daily and continual process. One way in which companies can detect fraudulent activity is by performing regul
ar, often surprise, audits of financial records. The ACFE 2016 Global Fraud Study found that within organizations of 100 employees or less, management review and internal audits were the next two most effective methods of detection after tips.
A tool that is growing in use each year is the use of data analytics to detect irregular transactions. Using such tools, companies have the ability to identify out of place, duplicate, or suspicious payments, vendors, employees, etc. For example, to detect a fraudulent disbursement scheme, one could run a report that highlights all payments made just below the dollar threshold requiring two signatures. It’s possible that an employee is trying to avoid this control when making improper disbursements to him/herself. Another helpful report would be to run a comparison between employee home addresses and vendor address
es to see if there are any matches. This would be one way to see if an illegitimate vendor was created to issue fraudulent payments to an employee. There are currently thousands of experts in this field that can be hired to assist with this endeavor. Data analytics software packages also exist that may be a more cost-effective option for smaller organizations.
The main takeaway from the points covered in this series is that fraud can happen to any organization. Even a company with only five employees can find itself a victim of fraudulent activity if the proper safeguards are not in place. A proactive approach to fighting fraud may seem costlier up front, but
it can save thousands of dollars by thwarting an employees’ attempts to steal company assets. Proof of this can be seen in the 2016 Global Fraud Study completed by the Association of Certified Fraud Examiners, which found that organizations that lacked anti-fraud controls such as proactive data monitoring, management review, or hotlines suffered median losses twice as high as those incurred by companies with such controls in place. Unfortunately, too many organizations have discovered the hard way that it’s no longer a matter of if fraud will occur, but when.