Fraud is like a train wreck, you just can’t look away. Fraud scandals tend to make big headlines and great gossip. Not all fraud can be prevented; however, there are things that can be done to help minimize the opportunity with an anti-fraud program. It can be an uncomfortable topic; however, it is important for an organization to communicate what constitutes fraud, how it affects everyone in the organization and what they should do if they have suspicions.

In order for a company to build an effective anti-fraud program, they must encompass open communication, proactive policies and monitoring systems. Below we will dive deeper into each of the three necessities to build an effective program.

Open Communication

Communication of the program is vital to its success; even the best designed program will not work if no one knows about it. Employees should be properly trained at all levels to have knowledge on what fraud is and what to do if they have suspicions. This training must be on-going in nature or it will not have the desired effect. These trainings should include information on ethics policies, conflicts of interest and how to identify and avoid potentially compromising situations.

Proactive Policies

Proactive fraud policies will help derail instances of improprieties; these include measures like management review, mandatory vacations, job rotation and surprise audits. These policies are designed to thwart the actions of fraudsters by discovering the fraud or reminding potential fraudsters that there is a likelihood of getting caught.

System Monitoring

According to a recent study done by the ACFE, over 40% of frauds are detected through a tip with a majority of those coming from employees within the organization. It is crucial that organizations have monitoring systems like reporting programs, tip hotlines and reward incentives. For example, a hotline is a relatively cheap and efficient way for employees to communicate their suspicions of wrongdoing.

How an organization responds to detected or suspected fraud will send a message to its employees on how serious the organization is about getting tough. It can be an internal struggle between making headlines and sweeping it under the rug. If you find fraud, you must follow through with the corresponding punishment so everyone throughout the organization knows that behavior is not tolerated. Enforcing the organization’s policies and procedures will make employees rethink their plans to commit fraud. Ultimately, without follow through, your anti-fraud program will falter and be ineffective.

Written by: Kevin Brejnak, CPA, CFE, Partner