As the Practical Guide emphasizes, “An organization should strive for a structured as opposed to a haphazard approach.” The Guide is a good place to start developing a fraud prevention and detection program as part of your overall risk management efforts (or structuring a review of an existing program). But as always, diving into the details of organizing and implementing a program like this requires significant effort. Skipping steps or making assumptions about risks and mitigation practices without systematic assessment will often lead to gaps or weaknesses in the plan. … Continue reading
We recently received a call from a small business owner who had just discovered that a long time employee had been stealing from his business. The crafty scheme involved fictitious vendors and false invoices that resulted in checks being written to accounts belonging to the employee and his girlfriend. The thief (or thieves, as it turned out) was a trusted employee, of course, but rationalized taking the money so he could “support his family.” That is, support the family with luxury items, vacations, gadgets, and goodies.
This kind of fraud is distressingly common, despite that it is so hard to understand in the context of mature, cooperative behavior. We are simply programmed to learn to trust people that we share experiences and challenges with over a long period of time. We form teams.
The Rationale Does Not Have to be Rational
Donald Cressey’s well-known “Fraud Triangle” identifies three elements needed to trigger a fraud: opportunity, motivation or pressure, or rationalization. It’s the rationalization that most often strikes us as removed from reality in some way, or transparently false. We feel a shock when someone trusted betrays us, and our first reaction is that they must feel the same way—how could they do this? … Continue reading
Saturday wrapped up Fraud Week, the Association of Certified Fraud Examiners’ (ACFE) international week of anti-fraud awareness. We are extremely proud to have joined hundreds of organizations around the world to support this effort.
The risk of organizational fraud is much higher than many managers and leaders realize, as shown in the Report to the Nations research series sponsored by the ACFE. With a median loss of $145,000 in cases reported in 2013, fraud presents a risk to all organizations comparable to any other human risk factor.
In support of Fraud Week we produced several informational pieces, which are summarized here for easy reference:
This visual guide summarizes 10 key findings from the ACFE 2014 Report to the Nations and offers some tips to develop an effective fraud prevention program. Highlighted is the amazingly high incidence of fraud and counter measures that work to reduce the probability and cost of fraud. Get your copy of the guide here.
The Risk Mitigator is our monthly e-newsletter for risk managers and others concerned about organizational risk of all kinds. To honor International Fraud Awareness Week, we distributed a special edition of the newsletter highlighting some of our top fraud-related articles from 2014. These articles link prevention to the basic causal factors of fraud, and offer specific strategies and tactics organizations can use in designing prevention programs. View the special edition here.
Published during Fraud Week, this blog post offers tips for connecting the findings in the ACFE research with fraud detection and prevention strategies. The characteristics of fraudsters show that they will blend into the background of most organizations—they can be people at any level, with long tenure, and access to financial resources. The best response to this threat is to identify where the opportunities for fraud exist, and create controls or structures that make it harder to commit fraud and/or easier to detect.
One of the most striking findings in the 2014 Report to the Nations is that fully 40% of frauds were detected by a tip, often from someone within the organization. This makes a whistle-blower program almost mandatory for organizations that are serious about fraud prevention. This blog post explores the issues in designing an effective program, including how to overcome the natural reluctance of one employee to report on someone who may be a friend as well as a co-worker.
Every organization is at risk of fraud. And every organization can lower that risk with a well-structured fraud prevention program. Request a meeting with Lowers Risk Group to find out more about how your organization can fight fraud.
This week is International Fraud Awareness Week, a global effort led by the Association of Certified Fraud Examiners (ACFE) to minimize the impact of fraud by promoting anti-fraud awareness and education.
We are proud to be among almost 1,000 organizations supporting this effort through the publication and distribution of educational materials that can help managers identify fraud risks and develop mitigation programs. This week we will feature fraud prevention-related content on our blog and we have issued a special edition of The Risk Mitigator. We are also proud to announce the release of our visual guide, 10 Fraud Facts. The guide highlights 10 facts about fraud from the ACFE’s 2014 report and offer tips to help your organization develop an effective fraud prevention program. Get your copy here.
Awareness of the potential for organizational fraud is the first step toward prevention. Yet a surprising number of organizations have no systematic fraud detection and prevention policies in place, leaving them more vulnerable to this hidden crime than they need to be. … Continue reading
If you are like many business owners and managers, you are certain there are no fraud problems in your organization. Are you really sure?
Every two years, the Association of Certified Fraud Examiners (ACFE) publishes a new version of their “Report to the Nations” (here’s the 2014 version) on the incidence and costs of organizational fraud. In every report they find that about 5% of top line revenue is lost worldwide to thefts by employees, owners, or partners with access to an organization’s resources.
The aggregate monetary cost of these losses is staggering, and does not even estimate the on-going costs of damages to reputation. ALL types of organization are vulnerable, and ALL types of employees and owners perpetrate these thefts. The only distinctive pattern in the data year after year is that fraud is a ubiquitous problem.
And yet, we often find organizations that have no preventative measures in place against fraud, and take no effective actions to detect it. This complacency is a common human trait: if nothing has happened in the past, nothing is going to happen in the future. Predicting the future based on historic patterns is a powerful tool, and it is often accurate. … Continue reading
