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Fraud Prevention—Anything New Under the Sun?
Blog on Payment Processing, fraud • posted 02/15/12
Fraud prevention is something that is usually near top of mind for most Accounts Payable professionals. There’s hardly a week that goes by when there is not an article in a newspaper, magazine, or online describing a company that was defrauded by a vendor, or more likely, an employee. In fact a survey by “CFO” magazine of 760 companies found that 88% of them had been victimized by fraud in the prior 12 months!
And while we are always on the lookout for new techniques used by fraudsters, more often than not the means or methods described in these articles is nothing far out or new; on the contrary, the means and methods are all too familiar. It’s a sad truth that many organizations don’t even make the fraudsters work very hard.
Many successful fraudsters, it turns out, have sole responsibility for something – entering vendors, check creation and distribution, or even the entire financial reporting system. Simply applying the basic control of separation of duties would foil many of the reported frauds.
What to do:
Look over your systems and processes to determine if, intentionally or unintentionally, you have arranged it so that one person has sole responsibility for an AP function. If you find a weakness, correct it right away. This simple act would have saved many organizations from losses and from the embarrassment of being reported upon in the media.
Of course regular and surprise audits are helpful as well as having a means for employees or vendors to anonymously report suspicious behavior or transactions. Studies have shown that many frauds are discovered by tips provided by co-workers so long as they don’t have to identify themselves. Will there be tips that lead nowhere and waste time? Sure there will be, but any time an investigation is carried out the message is sent that reports of possible fraud are taken seriously.
Don’t forget to compare the vendor master file to the employee file periodically and not just by name – check addresses, phone numbers and socials as well. If any matches are found ensure that the employee should legitimately be listed in both files. Another recent article in “CFO” magazine concerning fraud offered a suggestion that is new – running periodic credit checks on employees.
Why the emphasis on checking out employees? The simple answer is that they are the ones who have the opportunity to commit fraud. And if you believe half of what you read in the media, some of them definitely take advantage of that opportunity!
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