Five Steps to Combat Fraud

Let's start with the obvious. Screen employees. Conduct audits. The Association of Certified Fraud Examiners (ACFE) provides these and other simple steps any organization can take to help manage risk and decrease losses.

Organizations around the world are losing an estimated 5 percent of their annual revenues to fraud, according to an ACFE study released earlier this year. Applied to the 2011 Gross World Product, this figure translates to a potential projected annual fraud loss of more than $3.5 trillion.

The ACFE advises organizations of any size to take the following measures to combat fraud:

Be proactive.

Establish and maintain internal controls specifically designed to prevent and detect fraud. Adopt a code of ethics for management and employees. Set a tone at the top that the company will not tolerate any unethical behavior. Implement an employee reporting system, such as an anonymous hotline, to help uncover fraud.

Establish hiring procedures.

Every company, regardless of size or industry, can benefit from formal employment guidelines. When hiring staff, conduct thorough background investigations. Check educational, credit and employment history (as allowed by law), as well as references. After hiring, incorporate evaluation of the employee's compliance with company ethics and antifraud programs into regular performance reviews.

Train employees in fraud prevention.

Once carefully-screened employees are on the job, they should be trained in fraud prevention. Are employees aware of procedures for reporting suspicious activity by customers or co-workers? Do workers know the warning signs of fraud? Ensure that staff know at least some basic fraud prevention techniques.

Conduct regular audits.

High risk areas, such as financial or inventory departments, are obvious targets for routine audits. Surprise audits of those and all parts of the business are crucial. A good starting point in identifying fraud risks and establishing a strategy to prevent such losses is ACFE's Fraud Prevention Check-up (PDF): http://www.acfe.com/fraud-prevention-checkup.aspx.

Call in an expert.

For most firms, fraud examination is not a core business component. That's why, when fraud is suspected or discovered, it is imperative to enlist the anti-fraud expertise of a Certified Fraud Examiner (CFE). The CFE credential is recognized by businesses and governments worldwide as the standard for fraud investigation, prevention and detection.

The ACFE is the world's largest anti-fraud organization and premier provider of anti-fraud training and education. Together with nearly 65,000 members in over 150 countries, the ACFE is reducing the incidence of fraud and providing the training and resources to fight fraud more effectively. For more information about the ACFE, visit www.acfe.com.