The incidence of fraud seems to be on the rise, particularly in most of the leading economies. The US and the UK seem to be the hardest hit, possibly due to being the leading financial centres in the world. Estimates of the cost of fraud are always on the low side as nobody truly knows the scale of this ‘hidden’ crime.
Fraud seems to be a problem that many do not give much importance to until it impacts them. Many people do not take care of themselves, eating and smoking until obesity or cancer impair their lives. The fact that prevention is better than a cure is just as true for fraud as it is for diseases. Given that unlike some aspects of health most fraud is completely preventable at very little cost to an organisation, this is surprising.
By typing ‘how to prevent fraud’ into Google you will find contacts for many expert fraud advisors selling fraud prevention packages. In some, if not most of these cases, the advice will have substantial value to anybody wishing to purchase it. In all likelihood the advice will consist of the following:
1. A examination of the business will be undertaken by the advisors that will include staff interviews and documenting business processes – the work undertaken during the annual statutory audit will be very similar.
2. This review will normally end up with a report about any weaknesses to fraud that might be present. These will be discussed with the management of the business and this will give the opportunity to fix the weak points within the business.
3. The specialist fraud advisor will suggest a ‘fraud policy’ is written and installed by the business. This is a document that sets out the organisation’s policy that it will not tolerate fraud within the organisation and document some of the steps that it has taken to ensure that fraud is considered to be unacceptable by all its staff.
4. The advisors may also offer training to the organisation’s staff in how to recognise fraud and how to take simple measures that are additional to the firm’s own policies that will further help prevent it.
5. Any commercially minded advisor will also ensure that the client business installs a ‘fraud response plan’ that sets out ways that fraud, if it is discovered, is dealt with. High on the list of responses will be contacting the advisors for further advice in dealing with the fraud.
The fraud expert’s advice is certainly an important benefit for the business, especially if it has not thought about the problem of fraud before. However, installing such systems alone will not fully protect the organisation. The reason for this is that the fraudster will be spending more time trying to find the chink in the anti-fraud armor – and many frauds continue to be discovered in businesses that have taken on board significant anti-fraud advice in the past.
Additionally what is needed is a perception that the fraudster might be just about to exploit another opportunity. The business itself needs to be also on the lookout for the same thing. One of the biggest mistakes is to spend vast sums on fraud prevention advice and then to consider the business to be protected. It is complacency that often allows fraud to happen again and again, even after formal anti-fraud advice has been taken.
Initial fraud advice need not be complicated or expensive, so long as an organisation takes on board an ‘anti fraud mind set’ and continues to be aware of the threat of fraud on an ongoing basis. Being seen to be reviewing fraud controls and talking to the staff about fraud risk on a regular basis is likely to be more effective in most companies than a one off visit by a fraud expert.