How much is fraud costing you?
A recent Portsmouth University study indicates that the National Health Service in the UK is losing a staggering £5bn to fraud each year – approximately 7% of healthcare budget. Could your business be losing money today because of fraud?
As a business owner you can look to prevent fraud with vetting employees, implementing an anti-fraud policy and running fraud awareness training sessions. But, what are you doing to detect fraud that is happening?
If fraud is happening in your business the longer it takes you to spot it the higher the price. There is no guaranteed way to spot fraud but here are 7 steps to help you.
Step 1 – Understand your exposure
An assessment would look at internal and external threats although internet should get more focus because this is where the greatest risk is. However, technology is only increasing the external risk with cyber crime.
Step 2 – Be aware of signs
The key signs include people living beyond their means or experiencing financial difficulties as well as close association with suppliers or customers and/or having excessive control issues.
Step 3 – Engage your people
Most frauds are detected by tip-off so the best way to protect your business is for your employees to act as a fraud detection team.
This starts with the directors publicising an anti-fraud policy. Next, the key individuals in the fight against fraud need to be clear on their personal objectives and anti-fraud responsibilities. The business must support the fight with anti-fraud training for both managers and staff.
Step 4 – Effective reporting
Make sure you have a fraud hotline which employees trust.
To increase the chance the hotline is used, make sure the whistle-blower’s identity will remain confidential. And, it is vital that employees believe that you will take action following the disclosure.
So, you need to have an effective investigation process which keeps the whistleblower informed of progress.
Step 5 – Carry out checks
This is where managers play an important role and there are two things they should focus on; transactions just below control levels/limits and expense claims with subsistence and travel.
Step 6 – Use data mining tools
Rather than rely on manual checks, data mining software and high life anomalies, trends and risk indicators.
Step 7 – Take action when fraud is detected
The anti-fraud policy should make it clear that fraud will not be ignored, anything unusual or reported will be investigated and there will be consequences.
Consequences would include dismissal and the fraud being reported to the Police with a request for prosecution.
It is recommended that reporting to the Police be automatic and without regard to any brand damage with stories appearing in the media. This is because most employees who commit fraud are first time offenders and the threat of jail is a key lever for protection.
Fraud, by its very nature, can be difficult to detect and the 7 steps are not a guarantee that you will not stop it or catch it. But, they do send a message to employees and give the directors and managers a framework to work within.