Business Fraud Prevention

Help Stop Bribery in its Tracks

Today’s companies face a tremendous amount of pressure to win the best deals and contracts. In some cases, employees feel compelled to offer or accept bribes to clinch a business agreement. And in some countries, bribery is widely considered part of the cost of doing business. Watch for Other Forms of Corruption   Bribery may be the most common type of corporate corruption, but there are other forms to watch for, such as: Conflicts of Interest – This results when an employee has an undisclosed interest in a transaction. The conflict prevents the individual from making decisions based solely on the business…

Don’t Undermine Internal Fraud Investigations

For even the largest and most sophisticated organizations, internal fraud inquiries can pose numerous challenges that can send a case off track, cause legal expenses to skyrocket, and put your enterprise on the losing side. Ranging from lax investigations to not knowing enough about local law, here are examples of six mistakes that turned victory into defeat: 1. Avoid rushing to judgment. The facts of a case may clearly seem to indicate guilt, but regardless of how compelling the evidence, your organization must conduct a rigorous investigation. In one case, a commercial builder’s internal audit department had evidence that the business’s controller had used corporate funds…

Accounts Receivable Fraud: Lapping Up Profits

The sale has been made, the customer has paid, yet the company receives no revenue. How can this happen? Accounts receivable fraud, commonly referred to as “lapping,” occurs when an employee is entrusted with processing customer payments but then steals the money for his or her personal needs. Once a lapping scheme begins, subsequent checks are used to cover the missing checks. The employee generally must continually monitor accounts so he or she can steal from one customer to pay others. Depending on the volume of checks received, a lapping scheme can be initiated and maintained over a number of…

Help Prevent Invoice Fraud at Your Business

When a supervisor with Burlington Northern Santa Fe Railway stumbled upon a way to submit fraudulent invoices to his employer, he enlisted several others in the scheme. In the end, more than $2 million in bogus or inflated invoices (details of the case are in the right-hand box) were submitted. How the Fraud Worked Two Kansas men pleaded guilty in 2010 to conspiracy to commit wire fraud against Burlington Northern Santa Fe Railway (BNSF). Matthew Wyrick, 35, and his father-in-law, Robert Steele, 64, were charged with various offenses related to BNSF, where Wyrick was employed as a supervisor in the…

Minimize Legal Risk During Internal Investigations

Let’s say an employee tips you off that some payments to a vendor seem suspicious. After looking into it, your company discovers that $60,000 in payments were all authorized by one employee and no one else in the purchasing department has heard of the vendor. You become concerned about fraud. What should you do? Clearly, you need to start some sort of investigation to determine if there is fraudulent activity going on. You might think it’s best to hand the matter over to the HR department and let them look into the matter from every angle but that could be…

Six Red Flags of Financial Statement Fraud

Many incidents of fraud are discovered inadvertently. For example, a staff member may notice something that doesn’t seem right and mentions it to a manager. Upon investigation, internal theft is found. But considering the potential damage that fraud can inflict on a company, it is obviously better to do more than depend on mere chance. Keep in mind that the earlier a company detects fraudulent activity, the less damage will be done. With that in mind, here are six red flags that can suggest wrongdoing in your workplace: 1. Unfair practice charges. If your company is sued and the lawsuit…

Eight Ways to Prevent Expense Account Fraud

Your employees may be cheating your company by turning in bogus expense reports. While each of these transactions may be small, they can add up to a bundle. Not only does expense account abuse erode profits, it creates an environment in which employees think they can get away with stealing — and perhaps move on to more lucrative fraudulent schemes. In addition, poor expense account reporting can jeopardize your company’s tax deductions for employee reimbursements if you ever get audited by the IRS.  For all these reasons, your company should have strict expense account policies. Here are eight specific suggestions: Create…

Tuition Reimbursement: How to Prevent Fraud

Investing in employee education and training is crucial to the long-term success of most companies. In order to remain competitive, many employers offer tuition reimbursement programs to attract and retain talented employees. The programs also provide tax benefits. The vast majority of employees that participate in tuition reimbursement programs do so in compliance with their companies’ rules. However, these programs can also fall victim to fraudulent activity in ways that might surprise you. For example, in one case, four employees submitted more than $400,000 in fraudulent expense requests to a company for college classes they never even enrolled in. (See right-hand…

How the Risk of Detection Reduces Fraud

Do your employees feel like they’re being watched? If they don’t, they may be emboldened to steal. In the same way that putting more police officers on streets tends to reduce crime, making your company’s anti-fraud activities more visible can discourage fraud perpetrators. Good internal controls are critical to preventing fraud. But many companies have learned the hard way that employees bent on fraud can find their way around internal controls if the incentive outweighs the risk. You must, therefore, make sure that your employees — including senior managers — understand that the risks of committing fraud are greater than…

Important Facts About Whistleblower Hotlines

In recent years, many companies have implemented hotlines for employees, vendors and others to anonymously report workplace behavior that is unethical or illegal. These hotlines allow employees to confidentially come forward with important information without fear of retribution. Just by having one in place, you can reduce fraudulent incidents, according to a survey done by the Association of Certified Fraud Examiners. But setting up an effective hotline involves more than putting in an additional phone line. Here are 14 important considerations that can make your hotline more successful. After all, once you set one up, you want people to use it….