Six Practical Tips for Fraud Prevention

Every year in America, we experience billions of dollars of corporate fraud losses. Most experts agree that fraud losses are higher in tough economic times – so as we continue to dig our way out of the recession, now is a good time to take some practical steps to protect your organization against fraud.

1. SET AN ETHICAL TONE THAT STARTS FROM THE TOP
Every organization should have a code of conduct that reflects their ethics and values. But it can’t just be on paper. Management must take that code to heart and demonstrate their commitment through their actions. Like any aspect of corporate culture, expectations regarding ethical behavior need to be communicated, understood and supported from the top down.

2. ESTABLISH REGULAR FRAUD DETECTION PROCEDURES
Regular internal auditing procedures specifically designed to detect major fraud are valuable tools. An example is expenditure audits. Simply having these procedures in place discourages employees from committing fraud in the first place.

3. USE A HOTLINE
A confidential, 24/7 hotline operated by a third party professional is a good way to detect fraud. Many companies are now legally required to have a way for employees to anonymously submit concerns. A hotline is the ideal tool, helping you to identify issues early, investigate them and take action.

4. EDUCATE EMPLOYEES ABOUT FRAUD
A hotline can’t be effective if employees forget it’s there and why to use it. Use tools like posters in break rooms, company intranet and employee newsletters to continually talk about ethical behavior. Your ongoing communication about ethical behavior needs to include what is acceptable, what is not acceptable and how to report unacceptable activities.

5. CONDUCT BACKGROUND AND REFERENCE CHECKS
These are simple actions that can prevent you from hiring someone who has a history of stealing from employers. No hiring effort is so urgent that this step can be skipped, because creating an ethical environment begins with hiring the best possible employees.

6. ASSIGN FRAUD OVERSIGHT TO SENIOR MANAGEMENT AND THE BOARD
Fraud is the great unmanaged risk, exposing companies to costly and potentially catastrophic losses. A senior member of management should be tasked with implementing fraud risk assessment and fraud management activities. The board should oversee this effort to ensure that it is done thoroughly. All executives should be held responsible for managing fraud risks in their part of the organization.

By following these simple tips, you can reduce fraud and its financial impact on your organization