What to do if your business is defrauded

Occupational fraud isn’t just a financial threat. It can potentially change a business’s reputation, culture and relationships. But before dealing with any larger ramifications of fraud, defrauded companies must first “clean up” the mess. This may include potentially terminating the perpetrator, taking civil action or referring the perpetrator to the police. Whatever a business chooses to do in the aftermath of a fraud incident, swift action is paramount and internal controls must be addressed. How do victims react? In its Occupational Fraud 2024: A Report to the Nations, the Association of Certified Fraud Examiners (ACFE) reveals that when organizations uncover fraud, 67% choose to terminate the individuals involved. In 57% of cases, companies refer fraud perpetrators to law enforcement. Of those, 45% result in the perpetrator pleading...

Dont Let Your Industry be your Fraud Destiny

Occupational fraud risk isn’t necessarily shared evenly by all business sectors. Certain industries — for example, construction, real estate, manufacturing and transportation — are usually more vulnerable to employee theft, according to the Association of Certified Fraud Examiners (ACFE). Other industries may not have greater fraud exposure but face specific threats. Here are some industry-related risks and how businesses in these sectors can prevent fraud with strong internal controls. Construction Some types of fraud are more prevalent in the construction industry, particularly payroll and billing fraud. Segregation of accounting duties — having them performed by more than one employee — is critical to reducing both types. To prevent payroll fraud, have someone independent of your accounting department verify the names and pay rates on your payroll. If you...

The Interview Before the Fraud Interview

When Anna, the CEO of a small manufacturing company, received an anonymous report about fraud in the accounting department, she wasn’t sure how to act. After all, the complaint could be accurate, but there was also a chance that it wasn’t. She called her company’s attorney, who recommended a forensic accountant to investigate. He also suggested that she perform some preliminary interviews to gather facts — but to be careful not to interrogate employees. If you’re in a position similar to Anna’s, here’s how to conduct interviews before a fraud expert comes on the case.  Investigation prep In advance of requesting any interviews, decide what information you’re looking for. Knowing what you want helps you get to the truth of the matter quickly and avoid getting sidetracked by...

Executive Occupational Fraud

In its 2018 Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) reported that owners and executives accounted for only 19% of all fraud cases. Yet they caused a median loss of $850,000, vs. a median of $100,000 for rank-and-file employees.  As such, they post the greatest occupational fraud risk. Executive thieves get away with more because they have greater access to assets and can more easily override internal controls. Their schemes also tend to continue for longer periods before detection — an average of two years vs. one year for non-manager employee schemes. So it’s critical to spot the signs of executive occupational fraud risk and nab these high-placed thieves. Occupational Fraud Risk: Greater authority = greater damage Traditional preventive...