Top 12 tips to reduce your fraud risk today - Simon Bevan

The six monthly update to our annual fraud report has seen the fraud rate nearly double. Reported fraud for 2008 was a staggering £1.2bn yet that figure has nearly been reached in the first six months of 2009, with the current figure standing at £960m. 

In the current financial climate fraud is one of the last things you need hitting the bottom line. Here are some simple tips I would recommend every company consider to fight fraud:

• 1 - Be wary of false accounting - Pay attention to relationships between the sales team and the customers. Management should look at year-end sales team actions and behaviour and the post year-end issue of credit notes.
• 2 - Review your bonus structure - Fraudsters believe that their work is worthy of more reward. Ensure your bonus structure is fair, transparent and in line with behaviours you want from your staff.
• 3 - Consider remote locations - There is often a link between fraud and the distance from head office. Regional offices may be overseen less by London based management, giving greater opportunity to commit fraud.
• 4 - Conduct zero based budgeting - Organisations should pick an area of their business, marketing for example, and embark on a “zero based budgeting” exercise rather than relying wholly on what happened last year.
• 5 - Pay attention to areas where there is no physical product - Any area of the business that has no physical product, such as consultancy services, factory cyclical maintenance or advertising, are often more open to procurement fraud.
• 6 - Assess IT vulnerability - Fraudsters use widely available tools, such as keystroke loggers, to obtain sensitive data like PINs and passwords. Solid administrative controls and passwords, prevention of unauthorised software installation, restrictions on USB ports and other sensible IT activities can reduce fraud risks.
• 7 - Don’t neglect over-performance - If something is too good to be true, it usually is. When you are assessing the performance of a business or an individual, make sure you pay attention to over-performance.
• 8 - Review changes to the supplier master file - This is part of a computerised accounts payable system where data is held on suppliers, including their bank account details. It is very important that an exception report is produced to show any changes to standing data on the supplier master file.
• 9 - Monitor the car park - Although it is stupid to flash your ill gotten gains at work, most fraudsters do. Pay close attention to the cars parked in the management car park and consider whether the salary you pay staff is in relation to the cars they drive.
• 10 - Perform background checks on recruitment - don’t give those with a flawed history the chance to commit fraud in your company. Over 50 per cent of people lie on their CV, so pre-employment screening to check backgrounds can prevent the employing the wrong sort of people.
• 11 - Pay attention to morale - Fraudsters are often unhappy at work and use that as a reason to justify fraud.
• 12 - Investigate high staff turnover - It is very hard to be a whistleblower at work. It is much easier to polish your CV and look for another job. It is good policy to have in place exit interviews for staff, giving them a final opportunity to raise any concerns about fraudulent employees.

If you’d like more information about how BDO's fraud team can help you, please contact Simon Bevan, head of the fraud services, or your local BDO partner.