Keep your business fraud-free by knowing what to look for.
To prevent fraud and corruption in the workplace you must first know what to look for. The signs aren’t always obvious but implementing systems and processes will help to identify them. Look out for these 10 ways fraud can occur in your organisation.
In the past, people have turned a blind eye to wrongdoing at work for fear of rocking the boat. In New Zealand, they might have been seen as a nark – but this is no longer the case.
Now more than ever, organisations of all sizes need to make sure they’re keeping watch. Doing this means they can put the right regime in place to help identify and fix issues of wrongdoing at work, before they blow up and become a major regulatory or legal problem.
In most cases, the person committing fraud or wrongdoing will be someone who everyone trusts, so how do you spot them?
Here’s what Report It Now knows about the ways people commit fraud at work.
1. Supplier slippage
A fraudster might be putting through lots of transactions with a supplier for no clear reason. The value might be slightly below that person’s delegated authority limit, or the supplier might be unknown to senior or finance staff. Payments could be made without senior or finance staff being aware of it. Or, there might be an unusually close or personal relationship with a supplier. They might go on holiday together.
2. 1980s invoices
Any invoice that appears unprofessional, hand-written – that is, not generated through a computer accounting system – is a red flag for possible fraud. If you find an average-looking invoice, is the description of what it’s for a bit light? If so, it’s worth delving in to.
3. The workhorse employee
Take note of employees who have no known reason to, yet are working long hours, after hours, weekends, overtime, refusing to delegate and refusing to take annual leave. Consider those who take leave, but won’t let anyone oversee their work while they’re away. They might refuse to take sick leave – even when they’re really unwell.
4. Domineering managers
Fraud is committed at all levels of an organisation. Red flags include a management team that is overly dominant. A management team or manager might be using liberal accounting practices that go against normal internal controls – delegated levels and separation of duties might be waved aside. There might be one manager who is dominant to the point where other staff won’t question him or her.
5. The dog ate my receipts
The possibility of fraud exists where there’s little or no supporting documentation for payments, especially credit cards, and especially if no one is monitoring expenditure. The same goes for missing documentation related to payments – fraudsters often present photocopies instead of originals, or make excuses as to what happened to the receipts.
6. Living large
One New Zealand employer was defrauded for more than $100,000 by a trusted 54-year-old female employee – yet they had wondered how she could afford to go on cruises, renovate her home and build hot rods. Fraudsters are often people who appear to live beyond their means. Their lifestyle might become suddenly flashy – cars, jewellery and holidays – when their income and situation doesn’t seem to support it.
7. Suddenly stroppy or silent
People who commit fraud often have a perception that they’re owed something by their employer. Watch out for significant changes in the attitude and behaviour of an employee – this could be displaying resentment or becoming more aggressive. Or, it could be someone known to be open and amiable who begins to dodge conversation and contact.
8. Splitting the bill
There’s room for fraud where there are odd transaction patterns not normal for your business or industry. Someone who’s sneaking around committing fraud might split a payment to a supplier to avoid triggering his or her delegated expenditure limit.
9. Matching details
It’s time to start asking questions if you find two or more suppliers (or staff) with the same bank account numbers and/or contact details.
10. Poor or weak internal controls
Organisations open the door to fraud when management doesn’t place importance – or doesn’t communicate the importance of – stringent internal controls. Be especially wary if managers don’t take action to sort things out if problems come up.
Give your people a trusted way to tip-off against fraud
When it comes to detecting fraud in the workplace, your own people are your invaluable eyes and ears.
Giving them an independent system – like Report It Now – to tip off possible wrongdoing is a smart move backed up by the Association of Certified Fraud Examiners. The body’s 2014 report found that tips are the most common fraud detection method, with over 40 per cent of all cases detected by an employee tip-off.
The same report found organisations with whistleblower hotlines were much more likely to catch a fraud by tip.
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