Fraud – The time is ripe
With the onset of the global financial crisis, many people and businesses are suffering the sudden impact of lost jobs and dramatic downturns. This has placed many people in unexpectedly dire financial positions. A position where some will start to consider options they had never previously considered - including fraud.
Businesses who are not actively engaged to seek out the signs of fraud can be caught out. Employees, clients and service providers can all use various forms of fraud to their advantage while your business looks to take advantage of every potential sale or opportunity. In many cases, perpetrators feel they have nothing left to lose – they are prepared to be brazen and run risks. It is very important to understand some of the key indicators which identify potentially fraudulent activity:
Failure to follow company processes
Managers who systematically circumvent existing procedures can potentially be covering illegal activities. This can be as simple as a manager who continually or regularly fails to submit documentation supporting expenditure on a company credit card. They may be required to produce receipts but continually find excuses as to why they cannot provide the relevant documentation.
Lack of policies and procedures
A reluctance to implement proper reporting procedures must always be questioned in a situation where assets must be accounted for.
Lack of proper documentation
When businesses are dealing with persons or organisations and there is a lack of verifiable documentation then this should always ring alarm bells.
Many businesses are lured by the prospect of increased business and will overlook normal checks and balances in order to get the new client. There are many ways in which clients can end up defrauding a supplier business.
Presentation
Be aware that the stated background of persons or organisations may not be consistent with reality. For example, many people simply use the title of director or managing director but there is no genuine trading business behind them.
Be wary of persons or organisations who claim to have a substantial organisation behind them which you have no information on. It is important to obtain business details and conduct basic checks including requesting company references.
Probity Checks
When evaluating the applications of employment candidates for key positions, you need to consider the extent of probity checks relevant for the position. You need to assess whether to conduct full probity checks to identify any relevant information which the applicant has 'omitted', including criminal record (with the applicant's approval), bankruptcy searches, basic internet searches etc. Sometimes even the candidate's reaction to being advised of a thorough probity check can be a flag in itself.
Unexplained business activity
Depending on an employee’s area of responsibility, indicators of potential fraudulent activity include: undertaking unusual transactions for which they cannot provide a satisfactory explanation, engaging in tasks that are not normally their responsibility, consistently staying late at the office / getting in early or taking minimal leave (they have to be there to cover their activities).
Failure to follow expert advice
When managers or employees deviate from expert advice, particularly legal advice where compliance is required, this should be an immediate red flag.
Quite often there is evidence of potential fraud directly in front of you but people feel they are too busy, don’t stop to ask the questions and choose not to follow their instincts. It never costs to ask questions.
As well as our fraud investigation services, MPOL Group offer fraud mitigation services to develop fraud control policies and procedures, conduct fraud risk assessments and provide fraud awareness training to your key staff. It is always cheaper to prevent fraud than to resolve it after-the-fact.
If you suspect fraudulent activity against your business or would like further information on protecting yourself from fraud, please contact Mark Lieberman or call on 03 9572 1433.