5 Best Practices for Fraud Prevention

5 Best Practices for Fraud Prevention

In today’s era of emerging technology, 33% of businesses are exposed to the risk of fraud each year. We at C.O.R.E. want to help our followers and clients prevent future issues. Misutilization of assets, resources, and staff embezzlement can lead to a further revenue loss of the business. If an effective risk and fraud prevention system is not implemented, this fraud loss can penetrate into the organization’s culture. With increasing businesses in the e-commerce, online fraudsters are one step ahead and the majority of companies are losing approx. 5 % of their yearly gross revenue. A recent study shows that Fraud trends are accelerating. Every organization should act prudently and must have a plan before the start of business for effective fraud prevention. Approx. 90% of business fraud comprises of Cash Stealing either in the form of taking noncash assets or preparing fake expense claims. Here are some strategies for fraud prevention for both small and large businesses.

1. Know Your Staff:

It is important for organizations to hire trustworthy staff and keep in regular contact and interview them to observe any attitude change. There might be different reasons for employee fraud that consist of lack of appreciation, overburden, and some kind of revenge against management. A sudden attitude and lifestyle change of employees, that include clothing and vehicle usage, can be an indicator of prospective internal fraud. Sometimes and unfortunately, most senior employee commits fraud due to some family issues or any one of the above-mentioned reasons. Establish code of conduct policies and processes to adhere company’s right to monitor all staff activities. Regularly conduct training sessions on Fraud, ethical behavior, and whistle-blowing processes, so that employees are equipped to deal with such dilemmas. Every single staff down the line should be aware of types of fraud, its associated consequences, and some anonymous reporting system to report any scope of fraud by keeping their identity safe.

2. Data Monitoring:

Fraud can be committed by uploading the company’s important and sensitive data on mobiles, and clouds and sharing it through emails. The company’s data must be secured enough to immediately prompt while transferring out of its domain. IT department must continuously and actively work and improve data protection and its associated challenges. Only authorized employees could have the access to sensitive and important data. For strict data monitoring, even unauthorized individuals should not have access nor be able to modify it. For effective data monitoring, companies should have regular backups, install malware protection and antivirus, use complicated and strong passwords and take special care while working remotely.

3. Implementation of Internal Control:

Internal controls are the regulations & policies set by the board of directors or senior management to secure access of records and assets and limit the authorities. Effective internal control ensures operations and efficient and effective, recorded transactions are accurate, risk management system is effective and financial reporting is reliable. Good internal controls help an organization achieve its goals and avoid surprises. By segregating, duties between employees help reduce risk of fraud. An effective internal control system detects mistakes caused by fatigue, misunderstanding of terms, unclear instructions, carelessness, and deliberate fraud. The maker and checker concept should be clearly communicated and staff should be deployed accordingly where a person initiating an invoice could not have the authority to approve it. During staff hiring, the code of conduct, confidentiality and privacy policy should be signed by all new employees and everyone needs to be aware of the consequences if a violation occurs.

4. Hire the Right and Trustworthy Staff:

During the hiring of new staff, besides checking educational background and experience, thorough vetting of his/her credibility and integrity is critical. Trustworthy individuals remain consistent at work, at home and in personal life, they are reliable, resourceful, and accountable. Sometimes a tip of upcoming fraud in the company may be raised by these trustworthy employees, which is a vital component of a healthy workplace environment. Establishing proactive communication and setting up a whistle-blowing mechanism ensures that all staff is well aware of possible signs of fraud. Sometimes an employee doesn’t avail leave for a longer time and seems to be loyal, but this might be a sign of hiding some fraudulent activity. For best practices, all employees must be rotated to different positions within the company after 2-3 Years.

5. Fraud Detection and Monitoring System:

An effective fraud risk management system along with efficient monitoring allows organizations to detect any upcoming fraud and prevent its occurrence. These mechanisms should be regularly updated to ensure their effectiveness. Once these systems are finalized, every employee must be aware of these plans and their implementation and monitoring methodologies. The first step of fraud detection and monitoring is, in-depth risk assessment and knowing the areas from which they could stem. This assessment begins with how employees interact with resources during day-to-day activities. After the assessment, risk governance must be implemented with well-written reporting procedures, whistle-blowing mechanisms, fraud awareness tolls, and corrective actions.

As risk management is a continuous process so every process must be regularly monitored and reported on a regular basis. Continuous monitoring and reporting will provide an up-to-date fraud management system. If you’re looking for assistance reducing or eliminating fraud from your condominium owners association, please don’t hesitate to reach out to us.

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