Every company today is at risk of some sort of fraud. Nothing is off limits for fraudsters — not cash, not data, not even valuables. Now that almost every business manages operations online as well as in office, the perks are notable — but the fraud risks are higher than ever.
If your company falls victim to crime, this can drain its resources, impact your brand’s image and even bring legal problems. Corporate compliance policies are put in place to ensure the safety of customers, and unless you take measures, you won’t just be dealing with losses when fraud occurs. Chances are, you’ll also face legal consequences.
Just as fraudsters have their methods to finding vulnerable companies, businesses have the opportunity to take measures to protect their business. One of the strongest tools you have against fraud is your team. According to a report by the Association of Certified Fraud Examiners (ACFE) 2020 Report to the Nations, 43% of fraud cases have been identified through tips, out of which half come from employees.
However, for your team to be able to detect fraud and feel free to speak up, they need proper education and leadership. Let’s discuss how you can prevent such activities and why your workforce is vital to this matter.
Equipping Teams with the Right Tools
Your team has the biggest potential of noticing signs of fraud but if you want to use this potential, you need to give them the right tools to make this happen. One of the smartest moves for a business today is to use fraud prevention software to monitor fraudulent activity. This can help boost team collaboration and reduce fraud rates thanks to features such as stats, reporting, scoring engine, customizable widgets, permission levels, data export and import, tutorials, custom filters and rules.
Fraud prevention software also allows you to deploy a variety of risk rules based on the risk vectors of your industry. You can also use it to perform background checks and obtain accurate risk scores to evaluate your business decisions.
By implementing this type of technology and training your workforce on how to use it, employees will be able to screen the customer journey, along with important customer activity, and look for signs of fraud. Equipped with the right tool, and proper training, your employees can be invaluable in noticing and eliminating fraudulent behaviors before they harm the company.
Awareness Is Key
There are two scenarios where your team can help detect and prevent fraud. For starters, they are often in direct contact with customers or their data. With proper training, they can notice signs of fraudulent activity and report them.
The second is actual employee fraud. Organizations worldwide lose 5% of annual revenues to fraudulent activities, with 42% of fraudsters being employees, 38% being managers and 18% being owners or executives.
A lot of the time, this happens because employees aren’t aware of what constitutes fraud or aren’t informed on what they should avoid. With fraud awareness training, businesses can prevent and detect fraud more efficiently.
At the very minimum, employees should be educated on what constitutes as fraud and how this can harm the company as well as themselves. They should also know how to report questionable activities on behalf of other employees and customers.
3 Tips For Fraud Prevention Training
Training and awareness efforts can significantly reduce your company’s risk of fraud. Let’s take a look at some actionable tips for effective fraud prevention training.
1. Train your staff to check the actions of others.
First, you need to decide how you’ll approach this matter to minimize the risk of internal fraud. You might want to separate the responsibilities across riskier departments such as accounting, and allocate these to different members of your team.
In the meantime, train your people and give them the responsibility to check what others do and how they work. If they know how to spot unusual behaviors, they’ll be able to report it when it occurs. You might also want to find individuals in your team that you can train to perform financial audits regularly.
2. Train your staff to look for external threats.
It’s not just employees that can scam your business and bring it big losses. Many of the threats come outside of the company. Your next move should focus on training your team on the external environment and teaching them how to identify threats. Many red flags and signs point to this, and training can help you avoid common crimes such as identity theft, new account fraud, invoicing for products that weren’t delivered, credit card fraud and so on.
Of course, for the training to work, you also need to create policies for your business. Decide on what tools you’ll be using, which documents you’ll request from customers and what procedures you need your team to follow.
Generally speaking, the simplest and most effective approach is to train your team to report any activity that looks concerning. A team that feels free to speak up will be more productive and involved in the work of the company. If you succeed to create an open communication culture in your office, you won’t only lead a happier team, but you will also get information that can save your business.
3. Use the 3 components of fraud awareness training.
Fraud awareness training should start with the most basic information that employees need to notice when something is not right. ACFE Insights points out three key components to base your fraud awareness training on:
How/what: To recognize fraud, employees need to be familiar with the different kinds of frauds your business is vulnerable to. Training won’t work unless they understand how different forms of fraud work, which is why you’ll need examples and practical training in which they can understand exactly what to look for and how to find it.
Let’s say that you’re training your team to look for vendor fraud. You can’t just give them a definition of it and expect them to figure out what to look for. Training means that you should show them how this fraud is detected. For example, you could teach them to check the packing slips or invoices against the inventory deliveries. If they look for employee fraud, they could look at discrepancies in reports, documents and files.
Who: Next is the matter of identifying “who” to look out for. There are red flags that help people detect fraudsters. They don’t all act the same, but some characteristics are common among these perpetrators. This is why part of the training should be dedicated to the fraudster profile i.e. the common behavior patterns of perpetrators. Teaching your team how to detect these signs can be vital to preventing fraud.
Why. Lastly, the employee should understand why people resort to committing fraud. This can help them better understand the perpetrator and with that knowledge, they can anticipate or notice any strange behaviors.
This is how the fraud triangle can become helpful. Your business should inform the team of this model and teach them about the things that lead people to commit fraud. For example, a person can have the opportunity because there’s a lack of discipline for offenders, the company doesn’t monitor their activity or the controls are weak. They might do this with the rationalization: “I work hard, I deserve it,” or “It’s only a loan, I will pay it back.”
At this point, your team should realize that fraud is not acceptable in any way and there are consequences to committing it. Such things will teach them about the temptations that fraudsters face, but also about what comes after they are caught. In other words, you’ll teach them what not to do and what is defined as fraudulent activity in the workplace.
Taking measures to prevent fraud is one of the biggest priorities of businesses today. A single criminal activity against your business can ruin your reputation or destroy the company altogether. An uninformed employee can harm the business severely, and if you lack proper measures to prevent fraud, this can cost you a fortune.
Your team is the best tool you have against fraud, so use it. It’s time to invest in proper training and dedicate some time and means to help your team better understand and notice fraud.