FinanceRegs.com » Risk of swindles is higher this year — 3 ways to fight back

Risk of swindles is higher this year — 3 ways to fight back

March 11, 2009 by Carol Katarsky
Posted in: Best practices, Communication, Fraud prevention, Hiring & training staff, Internal controls, Special report

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Chances are you’ll face more security threats this year. Are you ready?  Whenever the economy slumps, more would-be fraudsters are minted. Part of it is that people are desperate for money and get tempted by the apparent ease with which they can steal.

Others take advantage of everyone else’s fear, and use seemingly legit offers to con people — and companies — out of their money.

There are signs it’s already happening. The SEC has pursued 88% more enforcement actions related to securities fraud this year than it did in 2006. And the FBI recently said it expects its fraud investigations to increase from 38 cases last year to hundreds in the next year or two.

Internal solutions to internal and external threats

No matter how unlikely it seems that Betty in the next cube could be embezzling, or that a fake vendor could get its invoices approved and paid, it’s smart to take preventative steps now.

Your best bet is a two-prong plan to ensure that:

  • no one inside the company has the ability to commit fraud, and
  • if anyone from outside attempts financial shenanigans, that you’ll be able to catch it right away before any damage is done.

Start by doing an internal review of procedures to find any weak spots and shore them up first. And if you were debating any changes to procedure that might tighten controls, start implementing them. (Upper management isn’t going to grumble about changes or time lost if you can explain how this will help save money long-term.)

Once Accounting has done its part, there’s still one more step: Explaining the changes to other departments. If they aren’t on board, your controls won’t be fully effective.

Granted, you don’t want to give away too much detail — otherwise, you could actually make some types of internal fraud easier. But there are  a few key things you’ll want to communicate to employees:

  • Controls have been made even stronger, and their compliance with new procedures is expected
  • A way for them to report any suspicious activity they see so it can be investigated, and
  • A list of fraud prevention red flags so they know what to look for when dealing with people outside the company.

Are you worried about more fraud attempts this year? What are you doing to shore up your procedures? Share your ideas in the comments.

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One Response to “Risk of swindles is higher this year — 3 ways to fight back”

  1. David Says:

    This is a timely post given the current economic environment. Fraud has increased and businesses should be more vigilant. Here’s a link to an article published in the Wall Street Journal on 2/19, http://online.wsj.com/article/SB123501158460619143.html

    What is scary about internal fraud is that it is very difficult to see coming. Only 3% of the crime is committed by people with a history of crime. What’s more, most have worked at the company for 5-10 years. In short, these are often not the people you would expect to commit fraud.


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