Employee Fraud

This is such a sensitive topic to discuss about as the thought of acknowledging that someone you hired is committing fraud against your business is difficult to take. Business owners are often laid back on implementing fraud prevention programs, most often citing cost reasons, while others hold their collective breath, hoping and praying that somehow they miraculously avoid this employee misconduct all together or worse they are totally convinced that don’t have any employee fraud problem.

According to the 2012 Report to the Nations on Occupational Fraud and Abuse from the Association of Certified Fraud Examiners, companies lose 5% of their annual revenue due to employee misconduct. Last year alone, the median loss related to fraud cases in the workplace was $140,000, with more than one-fifth of those victimized companies seeing losses totalling at least $1 million dollars.

Fortunately, there are effective and affordable ways to reduce your risk of exposure. I have put together an 8 point program for business owners to follow in order to identify cases fraud might occur, more importantly to prevent it and educate your employees about its importance. Let me go straight into these programs:

Know your Employees: Getting to know your employees is very vital,engage them in conversations and through that, you may identify potential opportunities and risk for fraud. So from employees talking about issues such as his spouse just lost her job or an issue in the family that might create financial difficulties or if there are personal issues within the family, all those issues may be indicators for creating opportunities for fraud.

Employee Awareness: This actually starts with the hiring process, conduct background check on any potential candidate, search the person’s name on google, facebook and twitter just to see if there are any information out there, you would be surprised about the amount of information out there on the internet. This could also mean establishing set written policies for your employees, let them know you consider it a serious offence and would take serious actions if any employee violates your policy. It is important for business owners to communicate this very often to their employees.

Segregation of Duties: This is very key for reducing your exposure to fraud, you don’t want the same person to open the mail, reconcile the cheque book, make the cash deposit and pay your vendors. This would create an environment for potential fraud.

Mandatory Vacations: Most often, employees who perpetrate fraud will be unwilling to take time off work as what they are doing may be uncovered when they are gone, so it’s important to ensure employees take their vacations.

Train your Employees in Fraud Prevention: Employee tips are one of the common ways of detecting fraud, training your staff on basic fraud prevention techniques and what to do when fraud occurs will help you establish a first line of anti-fraud defence.

Carry out Employee Surveys: Asking employees how they feel about their employer is an excellent way to assess employee satisfaction and uncover possible opportunities for fraud. When used correctly, employee surveys can improve morale and help employees feel involved and in control of what happens to them in the workplace.

Establish a Hot Line: Setting up employee hotlines makes it much easier for your employees to report situations that may be going on, this also demonstrates your company’s commitment to ethical behaviour which in turn reduces the risk of fraud. “The ACFE emphasizes that employee hotlines are the most common way companies root out fraud, even though employees may be reluctant to use them to tattle on their bosses (and hence the reason that executives are able to hide it longer; lower-ranking employees tend to be able to hide for only a year). Perpetrators who have higher levels of authority are in a better position to override controls or conceal their misconduct, according to the ACFE report”.

Hire Experts. I can’t emphasize this enough, but typically the business is the biggest asset a business owner has and they do things to protect it but they don’t invest money to protect it against fraud. If you think you have uncovered a case of employee fraud, it is wise you speak to an expert such as a Certified Fraud Examiner about it, as they would give you an objective view of the matter.

This list is not exhaustive, if you want to know more about this subject matter, please get in touch with me via email (contact@emgfraudconsulting.co.uk). I would be happy to do a seminar on this or related topic in your organisation.

The Threat of Social Networking

Social Networking is changing the way we live our lives, infact is now an integral part of the way we live, work and play. Over the years, sites like Facebook, Badoo, MySpace, Hi5 and Bebo have helped friends to connect online and share messages, pictures and videos, as well as to meet new people, chat and play games while these sites have also helped business owners in the area of marketing, communicating with customers and collecting information. It is important to note that these social networking sites have unexpected consequences, and people unaware of its inherent risk can be caught off guard.

The Risk

The growth in the popularity of social networking sites has made them and their users a prime target for fraudsters and scammers. These sites are used to spread malicious software or application downloads, to steal personal information or to target individuals or their friends and family for criminal activity (such as fraud).

Scammers can also use social networks to impersonate others (often celebrities) by setting up fake accounts in their name. Therefore it is important to be aware of the dangers arising from social networking sites and to limit the amount of information you disclose online.

Common Types of Scams

Identity fraud: People do often give away unnecessary information on social networks which can then be used by fraudsters to commit crime or sell on to others.‘Live chat’ facilities are sometimes used to trick you into disclosing information. Even small pieces of information can be very useful to a fraudster more particularly when combined with other information obtained elsewhere.

Romance fraud and ‘honey traps’: Fraudsters use online dating sites to target innocent people for dishonest purposes by claiming to be who they are not. These fraudsters often use sophisticated and convincing tactics to earn your trust before asking to borrow money that will never be repaid or to have access to your bank accounts or other personal information that can then be used to commit crime.

Rogue or fake apps: These can be for anything – games, video calling, anti-virus patches, smartphones etc. Some are dummy apps leaving you out of pocket while others seek to compromise your email or account details to send spam-related or malicious site links to your friends or followers.

Fake videos: These claim to show videos of celebrities or ‘shocking’ events, but require you to complete a survey (or surveys) first Sharing or liking the posts helps to spread the scam further. Ultimately the video may be non-existent or false. Meanwhile the scammer has been paid a commission for the surveys you have completed.

Managing the Risk

· It is very important to know that social networking takes place in public places with limited privacy. Even innocent information shared with the world can be dangerous in the wrong hands.

· Be very careful about accepting ‘friend’ requests from people you do not know – don’t add them. Be careful about the type and amount of information you post about yourself, family, friends and employer when using social networks

· Be aware that some media tools e.g. "Triplt" broadcast trip and travel plans. Be cautious about posting status updates indicating where you are or going too.

· Make sure you read and understand the social network’s terms and conditions for use, no matter how boring they seem. Do some research on the internet about what others are saying about the site; are there any privacy or security issues that you should be aware of? Will your data be shared with third parties?

· Reduce the amount of personal information you post on these social networking sites. Do not disclose your home address or mobile phone number- This information can be very useful to fraudsters and others.

Gbolahan Babalola, CFE is the Director of EMG Fraud Consulting Limited. His passion is fraud prevention awareness for businesses, companies, non-profit organisations and private clients. He can be reached at contact@emgfraudconsulting.co.uk