Risk Assessments are a Critical Anti-Fraud Tool

Fraud risk assessments have been shown to prevent occupational fraud and limit losses for victimized organizations. These tools have become more prevalent in recent years, according to “Occupational Fraud 2022: A Report to the Nations” published by the Association of Certified Fraud Examiners (ACFE). But although almost 50% of businesses perform fraud assessments, many owners and managers may be unaware of the value of these procedures and how the assessment process works. When and why? Fraud risk assessments generally are conducted by internal auditors, either on a standalone basis or as part of a comprehensive enterprise risk management program. You may want to conduct assessments annually or whenever there have been major organizational changes or disruptions. The COVID-19 pandemic, when many businesses closed temporarily and many employees started...

Partially Empty Offices Can Be Fertile Ground for Theft

If most of your employees have worked from home since the start of the pandemic or are only gradually transitioning back to onsite work, your office may be emptier than in pre-COVID days. This can make theft easier. “Creepers” can gain access to offices or other physical facilities via unlocked doors and social engineering techniques and steal whatever they can get their hands on. They may even engage in corporate espionage and network hacking. Common schemes In a common creeper scheme, individuals pose as employees. They might enter a normally locked office by chatting with employees outside the building, then follow them through the door. If questioned, they could claim they left their badges at home. When the coast is clear, they steal purses, mobile devices and...

Protecting your Business from Organized Crime

During the early stages of the COVID-19 pandemic, many cash-short small businesses turned to their banks, while others sought help from family and friends. Unfortunately, these sources weren’t enough in all cases. When government aid arrived, it was too late for some companies. For others, government loans and grants helped but didn’t fill the cash shortfall. The resulting crunch provided an opening for organized crime enterprises to infiltrate the corporate world. Of course, organized crime has always represented a threat to legitimate businesses. But the increasing number of fraud schemes perpetrated by criminal gangs means you should examine your company’s transactions more closely. Common schemes Organized crime has several ways of inserting itself into your business. Look out for the following common scenarios: Extortionate loans. When faced with a...

6 Tips for Foiling Fake Suppliers in Online Marketplaces

Supply chain issues continue to hurt many U.S. businesses — possibly in more ways than you think. Not only do supply shortages and delays make it difficult for companies to ramp up business and recover from the pandemic slowdown, but they also make some fraud schemes easier to perpetrate. For example, criminals might advertise hard-to-get goods, then ship defective products — or no products at all — to unsuspecting buyers. Here are six tips to help your company avoid losses from such scams: 1. Evaluate marketplace safety. Many online marketplaces invest heavily in preventing fraud and are willing to reimburse funds stolen from customers. But not all of them are proactive. Before using an online platform to buy goods, review its fraud policy. And if you’re defrauded,...

Highlights from the Latest ACFE Fraud Report

Preventing, detecting, and investigating occupational fraud requires a deep understanding of the types of schemes, potential financial losses, emerging threats and risk mitigation strategies. To that end, the Association of Certified Fraud Examiners (ACFE) has published its “Report to the Nations,” the preeminent source for occupational fraud statistics and trends, every two years since 1996. The 2022 ACFE report covers 2,110 occupational fraud cases in 23 industries and in 133 countries. Surveyed organizations have lost more than $3.6 billion to fraud. The report can help your organization understand and mitigate fraud threats. Here are some of the highlights. Three types The ACFE divides occupational fraud schemes into three types: Asset misappropriation.  This includes cash theft, fraudulent disbursements, larceny and misuse of inventory and is the most common type of...

How to Qualify for - and keep - Cyber Insurance Coverage

These days, it’s common for businesses to purchase cyber insurance to help mitigate financial losses from network breaches. According to the U.S. Government Accountability Office, the proportion of businesses adding cyber coverage increased from 26% in 2016 to 47% in 2020. But in the event of a loss, processing such claims can be expensive, and insurers are becoming more selective about the companies they agree to insure and for how much. In response to mounting losses from cybercrime, insurers are also raising premiums. If your company wants to qualify for cyber insurance at an affordable price, we recommend the following five steps: 1. Spend time with the application.  Insurers ask applicants to complete a security questionnaire to help them understand the risks facing the companies. Answering the...

Keep Cybercriminals from Stealing Your Businesss Brand

When criminals steal an individual’s identity, the victim can take steps to minimize potential damage by, for example, notifying credit agencies and freezing bank accounts. But what happens if a cybercrook steals a company’s identity and uses it to engage in fraud? This situation can be more complicated — and expensive — to resolve. Fraudsters who use your business’s digital assets for their benefit are known as brandjackers. Brandjacking schemes may involve copying websites, social media accounts, logos and email domains to lure your customers, suppliers and other stakeholders and defraud them. But you can fight back. Consider taking these seven steps: 1. Monitor social media chatter.  Maintaining control of your brand and its digital assets is critical to detecting brandjacking. A big part of this is monitoring...

5 Ways to Foil a Fraud Department Scam

When banks detect suspicious activity in a customer’s account, they often call account holders to discuss the transactions. Time is of the essence when it comes to preventing fraud, especially in the case of wire and automated clearing house transactions. In most cases, if a caller claims to work for the fraud department of your or your business’s bank, the call is likely legitimate. However, in a currently active scam, criminals pretend to be bank fraud investigators and try to extract account information from consumers or employees. Here’s how to identify criminals and prevent account breaches: Don’t trust caller ID. A fraudster might “spoof” or fake a phone number, which means your caller ID could display a bank’s fraud department name and number. Even if caller...

How Cash Flow Statements Help Experts Find Fraud

Many fraud investigations focus on financial statements. Because cash is the most commonly stolen business asset, fraud experts regularly scrutinize statements of cash flow for signs of misappropriation and fraudulent disbursements. If you suspect occupational fraud and request an investigation, here’s what the experts might find. Unusual changes Your statement of cash flows shows how cash changed during the year. Forensic accountants generally look for amounts that seem unreasonable and for increases or decreases in accounts that seem to contradict trends in operating cash flows or other financial information. The statement of cash flows is typically broken down into three categories: Cash from operations, Cash from investing activities, and Cash from financing activities.  Fraud experts often apply ratio analysis to detect unusual changes that might indicate fraud — for...

What to do When Your Identity is Used to File a Fraudulent Tax Return

In Fact Sheet 2022-25, the IRS has provided information about how taxpayers should handle non-tax and tax-related identity theft. When a taxpayer believes their personal information is being used to file fraudulent tax returns, they should submit a Form 14039, Identity Theft Affidavit, to the IRS. But in most cases, taxpayers do not need to complete this form. Only victims of tax-related identity theft should submit the Form 14039, and only if they haven't received certain letters from the IRS. All taxpayers can request an Identity Protection Personal Identification Number (IP PIN) using the Get An Identity Protection PIN (IP PIN) tool on IRS.gov to protect themselves from becoming a victim of tax-related identity theft. What is tax-related identity theft? Tax-related identity theft occurs when someone uses a taxpayer's...