Financial Fraud

Fraud can be a sensitive issue, especially if it is occurring within the workplace.

In a business environment, it’s essential to know how to detect a fraudulent act and how to deal with it professionally.

What Is Fraud?

Fraud is an act that is committed by organisations/individuals and entails wrongful and criminal acts in attempts to gain financial or personal benefits.

Unfortunately for us, fraudulent behaviour is becoming more and more apparent, particularly with the rise of social media and advancing technology. There are various ways that fraud can occur within a business and ways prevent it, some of these are listed below:

Exploitation of Policies & Procedures by Staff

One of the key methods to ensure that your business is safe guarded against fraudulent activity and exploitation of your policies and procedures is prevention. Internal controls must be designed and put into place immediately to guarantee effectiveness and efficiencies of operations, compliance with laws and regulations, safeguard of assets and accurate financial reporting. Some of these controls should include:

• Separation of Duties - no employee should be responsible for both recording and processing a transaction
• Access of Controls - should be limited to those employees with an appropriate oversight of the business
• Authorisation of Controls - a system should be implemented on who and how transactions are authorised, recorded and reviewed.

Payments Fraud/Personal Expenses

This method is the most common and would normally occur after the exploitation of policies and procedures have been breached or not properly put into place. Examples of this type can be any of the following:

• Regular payments of the same amount - one to supplier, one to fraudster
• Rounding up dollar amounts on payments
• Suppliers paid several times in one month
• Super "friendly" Staff/Supplier relationships
• Journals entered or altered in the ledger well after the transaction occurred
• Use of complex, unreconciled "clearing accounts" especially for electronic payments
• Use of external systems, such as Spread Sheets, to reconcile or report on the ledger accounting system.

Fraud VIA Internet Banking

This has become a high profile method in recent years as technology has progressed, but there are still ways to minimise fraudulent Internet banking behaviour in your business with the help of your Financial Institution or Bank Manager:

• Ensure that authorised individual in your business has a banking token which will ask for a special code each time you wish to make payments - this is a way of keeping them secure too.
• Double authentication required - Login plus a text message code in order to login and make payments
• Account lockout functions
• Maintaining records of Online Payments with detailed descriptions - this should be mandatory.

Ways To Be Proactive

• Recruiting the right staff is the first and most important step - during the the interviewing process, make sure you follow up on references and do any necessary background checks, it doesn't hurt asking questions or going into detail about the potential employees pros & cons. This is called due diligence.
• Establish policies and procedures for all staff members and make sure you keep them up to date with any changes within the business. Ensure they comprehend the changes implemented and encourage staff to sign a policy of understanding. These changes can also be minuted in Staff Meetings or Newsletters.
• Create the work environment you would like to work in - by doing so, you are not only satisfying yourself, but you are also satisfying your employees by providing them with an open, positive and honest workplace. Make time to sit with your employees and value and action their feedback where necessary.
• Performing monthly audits of the company's financial expenditure should be regular occurrence. Not only will this give you peace of mind that the business is running smoothly, it will also indicate to your staff that fraud prevention is a high priority in the business and can be easily detected.