The basic of preventing fraud

The basic of preventing fraud

Does your organization have a strategy to fight fraud? Since the risks of fraud cannot be underestimated, it is not enough just to detect and investigate fraud. Fraud can never be eliminated from the business entirely, simply because collusion can always overcome normal organizational controls. To combat fraud, an organization needs a different and fresh approach that will need to cover all aspects of the fraud cycle.

Preventive action should begin with a recruitment process. Before a company opens its doors to new employees, managers should stop and ask themselves “Do I really know this person well enough to trust them with my money, confidential information, and above all my reputation?” Many companies believe that their recruitment procedures will deal with this question. However, they should bear in mind that:

  • 30% of employees admitted to lying while applying for jobs;
  • 18% of employees think it is necessary to exaggerate their curriculum vitae;
  • 34% of managers do not check the background of applicants; and
  • 36% of organizations state that untruths on CVs cost them significant time and money.

Organizations should check each new candidate thoroughly. The more senior the position, the more thorough this checking should be. Senior staff has more opportunity to commit fraud as they are in positions of trust and tend to have the ability to authorize payments and approve contracts. They are also more likely to commit frauds that can permanently damage their organization.

During the recruitment process, consider these:

  • Ask all potential employees to complete a detailed application form
  • Look for gaps in employment history
  • Request written references and check by telephone
  • Check all qualifications
  • Carry out in-depth due diligence in relation to senior employees
  • Obtain criminal records
  • Carry out background checks on temporary and contract staff as well

Background checks should also cover an individual’s complete membership of professional bodies, financial status, directorships held and any disqualifications, and last but not least, media and Internet searches. Remember, time and money spent at this stage can save thousands of dollars in investigation and legal costs when fraud comes to light.


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