This week an accountant who diverted almost £200,000 from his employer to spend on expensive holidays was jailed for four years. When interviewed by police and asked why he did it, his answer was simply ‘because I could’.
For those of us who would never dream of committing an offence like this, that answer seems conceited, but the Association of Certified Fraud Examiners (ACFE) Report to the Nations 2020 found that a lack of internal controls was the most common enabler in fraudulent activity committed by staff. Considering this is swiftly followed by a lack of management reviews and the ability to override internal controls, its perhaps less surprising that those who can take advantage, do.
Throw into the mix a global pandemic, and many organisations have found themselves vulnerable to exploitation by a fraudster. Changes to our working practices, the demand for our attention to be elsewhere and a general sense of confusion about how to manage through this period are all likely to all detract from what may previously have been a robust internal control framework, providing fraudsters with more opportunities than ever before.
What about those of us who would never dream of committing an offence like this? Well that number is reducing, as previously honest and trustworthy staff and suppliers face unprecedented financial difficulties, new pressures are leading them to act in ways that would have previously been inconceivable to them, let alone their employer, during the ‘old normal’. This is undoubtedly demonstrated by a threefold increase in fraud during the last recession, which we now expect to be less impactful than what is to come.
What can you do to help prevent fraud?
As we know, the best and most effective solution in every sector is to prevent fraud in the first place, and whilst this may not feel like a priority given the countless financial, operational and logistical challenges organisations are facing currently, preventing fraud need not be arduous or expensive. It can be achieved by addressing a few simple questions:
- Is there a robust anti-fraud and bribery policy, setting out your zero-tolerance response to such activity, an accessible reporting route and a response plan that can be deployed promptly where needed?
This is a simple step to implement that will support your development of a strong anti-fraud culture, which in turn can stop fraud in its tracks six months earlier and reduce associated losses by 49 per cent.
- Is there a good understanding of which business processes, systems and even particular personnel are most at risk of fraud or bribery?
Completing an organisation wide fraud risk assessment will allow the recording, managing and monitoring of fraud risks in the same way that other business risks are managed. This will ensure that controls and assurances are sufficient in protecting the organisation, are adapting to the current changes in process and risk environment, and will allow you to intelligently and efficiently direct work to mitigate risks where controls may be found to be lacking.
- Do staff understand what fraud and bribery are, how these offences might present themselves in the operating environment, and how they should react if they spot it?
Staff can often be found to be entirely unaware of fraud as an organisational risk, and how failure to follow certain processes, such as when working remotely, may allow it to happen. An efficiently implemented fraud awareness programme deployed effectively throughout the organisation, with messaging adapted depending on the level and nature of risk in certain departments, will empower staff to protect the organisation.
Organisations with these simple controls in place report 33 per cent lower overall fraud losses than where these are lacking.
International fraud awareness week
International fraud awareness week, led by the ACFE, runs from 15 to 21 November. The ACFE are the world’s largest anti-fraud organisation dedicated to reducing organisational and occupational fraud, through raising awareness about fraud and encouraging organisations to proactively take steps to minimise its impact.
We know fraud is happening every week, but with 77 per cent of organisations reporting an increase in fraud, and 92 per cent expecting this increase to continue over the next 12 months, now is the time to take this opportunity to consider your preparedness and to seek advice from your peers and trusted advisors to protect your organisation.