{"id":9308,"date":"2020-11-05T13:36:32","date_gmt":"2020-11-05T13:36:32","guid":{"rendered":"https:\/\/crigroup.com\/?p=9308"},"modified":"2022-03-23T13:40:41","modified_gmt":"2022-03-23T13:40:41","slug":"fraud-prevention-debugging-fears","status":"publish","type":"post","link":"https:\/\/crigroup.com\/ar\/fraud-prevention-debugging-fears\/","title":{"rendered":"Debugging fears that paralyse fraud prevention"},"content":{"rendered":"

Debug fears for fraud prevention<\/span><\/strong><\/h3>\r\n

Even though companies understand the fraud risk factor –\u00a0<\/span>nearly 77 per cent of HR professionals accept that there is a risk that employees can initiate fraudulent activity because of the work-from-home arrangement<\/span><\/a>\u00a0during the pandemic – more often than not, companies do not take action to implement robust fraud prevention processes in place until the organisation is exposed to fraud or appear in the news due to an investigation, incident, or external and (or) internal violation. Based on the article by ACFE, we aim to answer why companies wouldn’t adopt fraud prevention and detection measures proactively.\u00a0<\/span><\/p>\r\n

The answer is fear. It prevents business leaders from being proactive about fighting\u00a0<\/span>fraud<\/span><\/a>. Business analytical tools and systems enable companies to identify red flags quickly, but they do not work as fraud prevention tools. 67 per cent of CRI\u00ae Group’s background screening survey respondents said they encountered one type of fraud – employee fraud – in their career. It’s alarming to imagine how others have encountered many other types of fraud. And still, companies pay lip service to efforts to fight fraud. So how the fear factor plays into the decision to fight fraud?<\/span><\/p>\r\n

Fear of associated expenses<\/span><\/strong><\/h3>\r\n

A fraud prevention tool is a cost you don’t always recognise an immediate return. Consider it like health or car insurance – when it comes to identifying and preventing risk and\u00a0<\/span>potential<\/span><\/em>\u00a0fraud, returns can be harder to quantify.<\/span><\/p>\r\n

There are some concerns about spending money on a system that might or might not identify fraud. And if the system does identify fraudulent activity, companies are now obligated to spend more for the additional investigation and possible litigation. It might not be a significant expense for some large organisations, but the budget is better reinvested toward a company’s bottom line.<\/span><\/p>\r\n

When trying to save their expenses, organisations forget that expense fraud is one of the most common forms of occupational fraud: employees fudging on their expense accounts. Earlier this year, Lookers (A London-listed company) warned investors they might be unable to buy and sell its shares from the beginning of July because of potential fraud on its books – confirming a \u00a319m charge to correct books after fraud inquiry. Whether through fictitious charges, fake receipts or invoices, or other improper use of expense funds, an expense account is sometimes seen as a low-risk, high-reward area for fraud. It shouldn’t be. Follow these five<\/span>\u00a0tips for preventing and detecting expensive fraud<\/span><\/a>.<\/span><\/p>\r\n

Fear of technology<\/span><\/strong><\/h3>\r\n

Based on ACFE<\/span><\/a>, “companies are concerned that implementing new software technology might increase their exposure to fraud via data breaches. They’re also concerned that technology will replace internal auditors. While data encryption and similar tools can combat the risk of data breaches, addressing personnel concerns are trickier.” Technology is meant to assist but not to replace people. It helps identify the red flags, but human input and\u00a0<\/span>investigation<\/span><\/a>\u00a0are required to determine if fraud is occurring and check the facts.\u00a0<\/span><\/p>\r\n

Appointing a fraud investigator is a good idea in this case. Fraud investigators are the front line of establishing the facts of suspected fraud or other unethical business behaviour. A fraud investigator’s skillset and wide knowledge of fraud laws, evidence gathering, and interviewing make them the go-to expert for investigating insurance fraud, financial fraud, procurement fraud, asset recovery, cyber fraud, healthcare fraud, retail fraud, etc.\u00a0<\/span>In this article about fraud investigators’ role<\/span><\/a>, we explore their key functions, responsibilities and knowledge, and how their skillset helps organisations.<\/span><\/p>\r\n

Fear of reputation loss<\/span><\/strong><\/h3>\r\n

“Companies might fear their reputations will take a hit if they uncover ongoing fraud schemes. Social media has become a prevalent form of information sharing, so all it takes is the hint of a rumour, and the damage is done. Employees might post the information \u2014 or alleged information \u2014 that makes it appear as though a company is attempting to hide something”, based on ACFE. This comes as the company’s advantage to be open with employees to fight fraud. Employees are less likely to whistleblow in public when they are safe and have internal options to report fraud and discrepancies.<\/span><\/p>\r\n

The key ways of managing the company’s reputation are being transparent, protecting data, and conducting due diligence. It may sometimes feel like your company’s reputation is out of your control. However, you can take steps to help manage your reputation and help steer the conversation. It becomes more difficult when you wait and try to undo later the damage that has already been done. That’s why being proactive in maintaining a positive reputation is the best strategy.<\/span><\/p>\r\n

Fighting fraud on the front line is key<\/span><\/strong><\/h3>\r\n

Companies must realise that the benefits of fighting fraud far outweigh the fears. Engagement in an early fraud education process acts as a buffer, leading to fewer fraudulent losses. Procurement and payables professionals must implement efficient processes that address red flags and track \u2014 early and upfront \u2014 non-adherence to mandates. Below is a quick overview of best practices for engaging analytic tools and front-line staff to identify and prevent fraud.<\/span><\/p>\r\n