You may have the best internal controls in the business world, but if your employees don’t follow them, your company is at serious risk for fraud. The same is true if workers aren’t aware of your company’s risks and can’t recognize red flags. The solution? Educate them.

Training is critical

A forensic accountant can conduct on-site, broad-based training for employees in the form of live or virtual presentations. This expert might use role-playing to help staff understand the various forms fraud can take, as well as how perpetrators think and identify their victims’ vulnerabilities and weaknesses.

Enlisting the help of external experts is particularly important for smaller businesses. Not only are they more vulnerable to fraud, but they’re less likely to have in-house fraud expertise. Small-business training can focus on the most common schemes for companies with fewer than 100 employees, such as billing fraud and check-tampering schemes.

Threats that require employee attention

In general, your company’s specific needs should dictate the content of your training program. But most businesses need to spread the word about certain threats. For instance, employees should be trained to observe coworkers who appear to be living beyond their means or who might have addiction issues. Both increase the likelihood that an employee will attempt to commit fraud. If these workers have easy access to payroll or other accounting functions, the risk increases. Provide stakeholders with a confidential fraud reporting hotline or web portal to report their suspicious.

Cybercrime is another risk every employee needs to know about. Phishing, social engineering and other techniques are designed to trick them into revealing company, customer and other confidential data or providing access to your business’s network. Workers need to learn how to keep information safe by handling email carefully, changing passwords often and updating security software as soon as required.

Optional training

Depending on your industry, you might want to train employees to spot other risks. Construction and manufacturing businesses, where on-the-job injury rates are high, should prioritize workers compensation fraud training. Retailers and other cash-dependent businesses need to educate workers about potential skimming schemes.

Also train employees to mitigate risks related to specific responsibilities. For example, those who authorize charitable donations should be taught to verify charities with the IRS to ensure they’re legitimate and tax-exempt. Hiring managers and HR employees — as well as those who vet potential vendors — must follow background check procedures.

Empower fraud watchdogs 

Rank-and-file employees usually are the first ones to spot fraud perpetrated by coworkers or managers. So give them the tools they need to succeed in their role as fraud watchdogs.

(This is Blog Post #981)