HOW PREVENTION AND DETECTION CAN WORK TOGETHER IN A COMPREHENSIVE ANTI-FRAUD PLAN
Benjamin Franklin famously said, “An ounce of prevention is worth a pound of cure”, and that statement is especially true for anti-fraud efforts. Having the ability to investigate suspected fraud is an important part of all anti-fraud frameworks, but it is equally important for organisations to have robust systems of controls to prevent and deter fraud from occurring in the first place. Those controls, paired with effective detection and investigation programmes, ideally work together to create a complete line of defence against fraud.
In the latest edition of our Report to the Nations, 2504 fraud cases from 125 countries were analysed to provide a clear understanding of patterns and trends in occupational fraud. In addition to looking at how the fraud schemes were committed and the characteristics of both the perpetrators and victims, the report analysed how frauds were detected and the effectiveness of anti-fraud controls.
Understanding how fraud is discovered is key to developing an anti-fraud plan for your organisation. One of the most important findings in the report is that the most effective means of detecting fraud is through tips. Of all cases in the study, 43 percent were initially detected by a tip, making it the top detection method by a wide margin. The next-most-common detection method – internal audit – was only responsible for detecting 15 percent of cases.
The lesson organisations should take from this data is that in order to have an effective fraud detection programme, employees, customers and vendors must be given a way to report suspicions of fraud. In most occupational fraud cases, someone within the organisation either knows about or suspects that fraud is occurring. By providing a secure, confidential way to report these suspicions, organisations can greatly minimise fraud losses.
Jul-Sep 2020 Issue
Association of Certified Fraud Examiners (ACFE)