Organizations that do not actively seek out fraud are likely to experience schemes that continue for much longer and at a higher cost.
According to the 2018 Report to the Nations prepared by the Association of Certified Fraud Examiners (ACFE), the data is clear: when organizations take active steps to detect fraud, you will decrease the dollar amount of your loss and the length of time the scheme is carried out.
What’s the difference between active and passive fraud detection methods?
Active detection methods involve a deliberate search for misconduct or an internal control designed to detect fraud such as IT controls, surveillance or an internal audit. Passive methods refer to cases where the organization discovers the fraud by accident, confession or unsolicited notification from a third party.
Tips are the most common detection method, with more than half the tips coming from employees of the victim organization. About one-third of the tips come from outside the organization including customers, vendors and competitors. The remaining tips come in anonymously. Whistleblowers often have a fear of being retaliated against, which is why it is important that people can make reports anonymously if that is a legally permissible option for your organization.
How You Can Collect Tips
Telephone hotlines are the most popular way for employees to report their suspicions, along with email and web-based online forms. But when one of these mechanisms isn’t available, whistleblowers are most likely to report the suspicion to a direct supervisor or some other trusted person within the company.
Training is Key
At a minimum, employees should be educated regarding what actions constitute fraud, how fraud harms everyone in the organization and how to report questionable activity. Targeted fraud awareness training for employees and managers is a critical component of a well-rounded program for preventing and detecting fraud. If an employee shares with his or her manager that there is something suspicious going on, the manager needs to know what steps to take immediately to share this information with the appropriate people so it can be properly investigated.
What other steps can you take to protect your organization? Download this 10-Step Fraud Prevention checklist as a starting point. There are many anti-fraud controls that you can put in pace to lower your risk and help you detect a problem more quickly.
BerganKDV has certified fraud examiners who can help you prevent fraud within your organization. Members of the ACFE, these professionals have successfully completed the CFE exam and have their applications approved by ACFE. CFEs must also complete a minimum of 20 hours of continuing professional education annually. Want to learn more about how these experts can help protect your organization? Start here.
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