Further, he says companies should have controls within inventory systems to prevent product theft, as well as time management systems (“it’s amazing how many employees steal time”) and even health care benefits.
Other controls include external or independent financial audits, code of conduct contracts, hotlines, job rotation, mandatory vacations, whistleblower rewards, and employee support programs. It is also crucial for workers to be educated about fraud and to know employers are watching and paying attention.
External Controls
Ratley also suggests having a right-to- audit clause with vendors, giving business partners the right to look at each other’s records concerning mutual transactions. And if questions are raised, he says a simple Internet search can verify an address and phone number. For more in-depth information, some companies visit physical sites or hire private investigators. In one fraud case, the address where a company was sending checks turned out to be a boat, in a marina owned by an employee.
Owners and managers should also ask themselves: “If I was going to steal money, how would I do it?” The answer is often surprisingly simple. Fraud prevention, truly, should start at the top with management setting the example. If these individuals “are not paying attention to the details, the employees won’t be; if management is not ethical, employees won’t be.” It is up to managers, Ratley says, to create and maintain “a culture of high ethical standards at all levels.”
Lastly, Ratley notes, “If employees see management taking advantage of customers, the employees will eventually take advantage of the management or the owners.” Everyone, he says, must be held accountable in an environment where fraud or dishonesty will not be tolerated.
Conclusion
To control occupational fraud, businesses must understand all the operational risks, as well as internal obstacles to dealing with such crimes. There are many possible schemes and each is a violation of trust, but it all comes down to common sense, Ratley says. The key is to institute internal and external controls to not only prevent opportunities for fraud and theft, but to create an atmosphere where such behavior is just not possible.
Technology & Occupational Fraud
With rapid advances in computer technology, companies have a new area to be vigilant about—occupational fraud.
“There are various technology solutions and abuses in occupational fraud,” says Keith Salustro, president of Security Best Practices, in Boston. Examples include theft of trade secrets, customer lists, and salary data, which are often easily accessible. Workers can “steal data with universal serial bus (USB) thumb drives, or take copies by forwarding them to remote cloud servers, or email via personal email accounts. Many cloud accounts are now encrypted, which makes it difficult to scan the outgoing email data for size and keyword content—such as a list of Social Security numbers.”
