According to the Association of Certified Fraud Examiners, the world loses 5% of its total generated revenues to fraudulent activities. The excessive use of technology is a factor that has paved the way for an increased number of frauds.
Technology has opened doors to better lifestyles and convenience. But it exposes people to high crime risks, theft, and fraud. In a scenario like this, companies must prepare for the worst.
Most companies are well-prepared for external fraud, but it shocks them when things go wrong internally. Handling internal fraud in a business is incredibly stressful. It is vital to deal with such frauds as soon as possible. Delaying the matter provides an open window to the fraudster, and they can get rid of essential documents and proofs during that time.
Handling Fraud in a Business
As internal fraud is unexpected, no one can be fully prepared to deal with it. Having a pre-structured Fraud Response Plan is a necessity when it comes to dealing with internal fraud. History provides evidence of organizations ruining their reputation after internal fraud by mishandling the situation because there was no more structured fraud response plan.
Fraud Response Plan
A fraud response plan is a document that outlines a systematic way of dealing with internal fraudulent activities. It makes the whole process organized and leads to a successful investigation. Besides dealing with internal fraud, it also helps an organization suppress any other fraud risks. Employers can show workers that they do not tolerate fraud through this plan.
It provides a framework for the managers that helps them resolve fraudulent matters and deal with the culprit.
Here is a step-by-step guide for handling fraud for organizations that do not have a fraud response plan.
Step 1: Informing the fraud incident manager
The first step in the process of dealing with internal fraud is to alert the fraud incident manager. The fraud incident manager will provide a plan outlining resolving the matter. It is advised to include only the most trusted individuals in this matter. Not maintaining confidentiality opens doors to the suspect disappearing or important information going missing.
Step 2: Gathering evidence
After preparing the plan, the next step is to gather enough evidence. All the trusted employees and managers must observe the suspect and all that is happening around them. Any vital observation must be written down. Many companies assign this task to the internal IT department, which is not a smart move. Gathering all documents, including invoices, contracts, checks, purchase orders, computers, and credit card statements, is essential.
Step 3: Prepare a report
The next thing to do is to prepare a report. This report must include the suspect’s name, the evidence pointing towards the suspect, any other suspects involved, and the most critical information if the activity continues. Also, it should include the names of all the individuals who know about the activity and the source of each piece of evidence.
Step 4: Acting
Organizations should never confront a suspect before preparing a report with sufficient evidence. A common mistake is to allow the fraudster to keep working in the organization or demotion. The correct way to deal with fraud is the immediate dismissal of the fraudster. Also, it is essential to take the matter to the authorities. By doing so, all other employees will understand that fraudulent activities are intolerable.
Step 5: Identify the root cause
After organizations have dealt with the fraudster, an important step is identifying the root cause. Without this step, the risks of fraud in the future are high. Therefore, dealing with fraud is essential to deal with and eliminate the root cause!
To all those organizations dealing with fraud, they must understand that maintaining confidentiality is essential. If sensitive information is disclosed and reaches the suspect, chances of them getting rid of necessary evidence are incredibly high! Another critical practice an organization must adopt in such a situation is to avoid confronting the suspect before collecting sufficient evidence.
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