De-centralise the accounting function: Don’t have too much authority in a single role, and restrict access to sensitive materials. The accounting function needs to have a clear segregation of duties. For example, the people who maintain and reconcile the accounting records should not be the custodian of the cheque books. Many corporations have the bank reconciliation performed by somebody outside the accounting function, or at least for the bank reconciliation to be subject to review and verification by somebody outside of the accounting function.
Segregation of duties also means segregating physical space and assets. Computer systems and areas that hold sensitive documents like invoices, receipts, ledgers and, of course, high-value assets like cash and inventory need to be physically restricted from unauthorized staff. Installing CCTV and holding unannounced inspections are effective deterrents.
Track your payments: Cheques should naturally be kept in a secure place, but companies can cut down on cheque writing by encouraging electronic payments, and capping the amount a single employee can write on cheques. Other strong anti-fraud measures to consider are instituting a joint-signature policy on payments over a certain nominal amount, ensuring that all sequential cheque numbers are duly accounted for, and that the copy cheques are reviewed by the authorized signatories.
If the right documentation systems are in place, a company should be able to maintain a complete audit trail and promptly capture accurate data. The absence of these systems may create the perception that the system is vulnerable, which can be exploited by fraudsters.
Think like a fraudster: If a fraudster is criminally moving funds out of a company, he or she typically tries to hide or mask the original source of illicit funds through a series of transactions, with the aim of converting the criminal proceeds into “clean” assets. The fraudster will often move the funds to a different jurisdiction, but they may also temporarily (usually inadvertently) transfer the funds to a personal account, which provides critical evidence and clues on the final destination of the funds.
Importantly, fraudsters also typically exhibit behavioral red flags that should immediately alert managers, human resources and compliance officers. Such behaviors include living beyond an employee’s means and exhibiting excessive control issues such as refusing to share workload or take holidays.
Background checks on potential hires: It is sensible to perform pre-employment screening which will serve to verify employment and educational credentials as well as gather references. Further, in some jurisdictions the law allows a potential employer to check criminal records. Not only are the checks themselves useful, but due to privacy laws many of these checks require consent from the applicant in order for them to be performed and, therefore, it is very possible that simply asking for a consent could deter fraudsters from applying for a particular job or where a limited consent is given this may of itself be a red-flag.
Implement ethics guidelines: Corporations should consider having in place a rigid and clear set of ethics guidelines appropriate for their particular company and industry. This means that employees will clearly know what is expected of them, and how they should respond if they are potentially faced with an integrity issue. The investment in time and resources to create this are small when compared with the cost of a major fraud.