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Associates: Your Internal Fraud-Stoppers

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In today's work environment, with so many associates working from home and businesses adapting to remote operations, fraud schemes related to the pandemic are on the rise.

In the healthcare industry alone, fraud rose 30% during the pandemic, according to Primary Source Verification provider 

Fraud has always been prevalent in the healthcare and financial services industries. But in 2021, TransUnion reported perpetrators shifted their focus to the gaming and travel and leisure industries, with digital fraud increasing 393% and 155.9%, respectively. In general, fraudsters will set their sights on a new industry every few months, preferring sectors with increasing numbers of digital transactions, according to Shai Cohen, senior vice president of Global Fraud Solutions at TransUnion. 

Many fraudulent activities can be caught by putting effective internal processes and procedures in place. What is one of the best weapons in the fight against fraud? Your staff. But in order to detect and prevent fraud, associates must first know what it looks like and what to do about it.

So let's start with the basics.

Educate Associates on Company Policies and Procedures

First, you must provide associates training so that your staff understands the proper business protocols at your company. It is important that they understand the repercussions of committing fraud – up to and including criminal prosecution.

Train Associates to Identify Sources of Fraud

Equally important, associates should know how to identify possible fraud. With more people working from home than ever before, there are a growing number of ways that fraud can originate. 

Educate your associates on the various types of fraud as they pertain to your business model, such as:

  • New account fraud – setting up accounts based on stolen identity or personal information
  • Check/credit card fraud – using fake or unauthorized checks, or using credit cards without authorization and/or transactions outside of company-approved uses
  • Phishing – fraudulent attempts to get personal or company information that can be used to perpetrate identity theft
  • ACH/wire fraud – fraudulent ACH or wire transfers, including Business Email Compromise (BEC), a form of phishing
  • Identity theft – using another individual's personal or financial information without his or her consent
  • Invoicing or over-invoicing – This is commonly done for products or services that were either never provided or never requested

Fraud can happen across a wide variety of departmental functions, with the most common being accounting, accounts payable and payroll.

Establish New Processes to Mitigate Future Fraud Cases

Once your associates are able to recognize fraud, consider putting additional processes in place to prevent new cases:

  • Cross-train associates to perform basic financial functions. Relying on just one person to manage a financial task or process makes it easier for that person to commit fraud.
  • Create a system of checks and balances. Assign multiple associates to keep the books, handle payroll, make deposits, reconcile bank statements and approve expenditures.
  • Train associates to perform basic internal audits. Oversight is an effective fraud deterrent. Require associates to perform regular audits both in and outside of their normal work areas.
  • Set up protocol in the event of suspected internal or external fraud. Your procedures for handling external fraud can be fairly straightforward. For example, if a cashier suspects that a client is attempting to use a stolen credit card, they should immediately notify a member of management before proceeding further.

With internal fraud, however, the actions taken may not be so clear-cut. Many associates will hesitate to accuse others of illegal or unethical behavior. It is, therefore, critical to create a climate of trust by establishing a confidential way for associates to share their concerns, such as with an anonymous reporting system.

Effective training can help protect against fraud both externally and from within your organization. It begins with a thorough education of your associates, strict protocols for handling fraud detection, and consistent follow-up to ensure that procedures are consistently put into practice.

To learn more about smart resources you can use for payables while combating fraud, click here.