Workplace fraud is a big problem today. It’s when money, information, and/or other items are stolen by an employee. Different methods of fraud include skimming, larceny, and physical theft.
The scale of the problem
According to the Association of Certified Fraud Examiners' 2014 Report to the Nations, about 5% of an organisation's gross annual sales are lost to fraud. The median loss caused by a single case of occupational fraud is around £95,000, and 22% of occupational fraud cases cost more than £650,000. The longer a fraud goes undetected, the more the victim organisation loses.
Are businesses concerned?
In the light of the potential losses involved, you might be surprised to learn that our 2015 Information Security Tracker survey found over a quarter (28%) of large businesses and three quarters of SMEs (77%) in the UK are not concerned about the possibility of employees stealing confidential customer or company information from their organisation.
What's the solution?
Combating apathy and establishing an ethical culture in the organisation is one of the most important anti-fraud strategies.
“An ethical culture promotes honesty, integrity, respect, responsibility and accountability,” wrote ethics professor Dr. Steven Mintz in a recent blog post. “These values lead to trustworthiness in business and a framework by which all business actions and decisions should be evaluated.”
At the same time, everyone should be aware that dishonest acts will be punished, says Forensic Strategic Solutions executive Kelly Todd. “The opportunity to commit fraud is easier to rationalise when employees believe their wrongful acts will go undetected and unprosecuted.”
Practical tips for your organisation
Here is a fraud prevention checklist for the workplace.
- Employee Training. Use on-going training to reinforce anti-fraud policies. What’s most important is that employees speak up when they see that something isn’t right in the workplace. Teach them common behaviour traits of inside fraudsters, including living beyond their means, working unnecessarily long hours, medical concerns, signs of drug or gambling addictions, and close associations with suppliers or customers.
- Tips Line. According to ACFE, tips are “consistently and by far” the most common detection method. Organisations with a hotline are much more likely to catch fraud by a tip. A hotline can reduce the median loss from fraud by 40.5% and reduce the duration of a fraud by half.
- Surprise Audits. Scheduled internal and external audits are critical business processes. But, according to a report by the Anti-Fraud Collaboration, surprise audits are the most effective when it comes to fraud prevention. Research has shown they can reduce the median loss from fraud by 43.4% and the median duration of fraud by 50%. Remember, fraudsters are more likely to cover their tracks if they know auditors are coming.
- Data Monitoring. Data monitoring keeps track of content and changes to company files. ACFE says this is an often overlooked but effective anti-fraud control and can reduce fraud losses by almost 60%. At the same time, no single employee should ever be responsible for any one function.
- Document Management. A comprehensive Document Management Policy helps to keep confidential information organised, compliant, and safe from creation to destruction. Documents are identified, labelled and securely stored until they are no longer needed.
- Information Destruction. To prevent any compromises of confidential information, partner with a reliable information destruction partner that has a secure chain-of-custody for both paper and electronic media. Document destruction best practices should include locked containers, secure destruction using cross-cut shredding technology, and a certificate of destruction after every shred.
Around a third of data breaches happen inside of businesses due to simple human error. This infographic illustrates how to reduce and avoid fraud.