Top 10 Tips for Fraud Prevention in the Workplace

One of the major responsibilities of business leaders is to help protect employee and company data. The third week of November marks International Fraud Awareness Week, a time dedicated to promoting anti-fraud education and awareness among business leaders and their employees.

Fraud includes any intentional or deliberate act to deprive someone else of property or money by guile, deception, or other unfair means. Workplace fraud, also known as occupational fraud, is committed by people who work for or do business with an organization.

Examples of workplace fraud include:

• Stealing cash
• Payment tampering schemes
• Billing schemes
• Expense reimbursement schemes
• Payroll schemes
• Inventory fraud schemes

According to the Association of Certified Fraud Examiners (ACFE) 2024 Report to the Nations, the median loss caused by a single case of occupational fraud is $145,000. Certified Fraud Examiners (CFE) estimate that organizations lose 5% of their revenue to fraud each year and average a loss of $1.7 million per case.

In addition to understanding the types of workplace fraud and associated costs, it is critical to understand how these practices may occur. In the ACFE report, it found that men commit more frauds than women and caused higher losses. However, fraud can be committed by anyone. All employees should be aware of behavioral red flags that can indicate fraud. These red flags include:

• Living beyond one’s means
• Financial difficulties
• A close personal relationship with vendors or customers
• Control issues or an unwillingness to share duties
• Irritability, suspiciousness, or defensiveness
• “Wheeler-dealer” attitude

To help prevent fraud, businesses should consider putting anti-fraud controls in place. According to the ACFE’s 2024 report, the presence of these controls is associated with lower fraud losses and quicker fraud detection.

One example of an anti-fraud control is a fraud prevention check-up. The ACFE’s fraud prevention check-up provides an assessment to determine a business’s protection against fraud. The check-up can identify gaps in your business’s fraud prevention processes, help you establish a relationship with a CFE who you can call when fraud questions arise, and bolster the confidence that investors and other stakeholders have in the integrity of your business’s financial reports.

Below are ten critical fraud protection strategies for the workplace.

1. Securely destroy information. Partnering with a reliable third-party information destruction partner can help prevent any compromises to your business’s confidential information. Information destruction partners can help your business destroy customer information before a fraudster can access it.
2. Create a comprehensive information security policy. It should comply with industry privacy laws, and there should be an information security incident response plan that is regularly updated and tested.
3. Utilize audits and other fraud detection reviews. Schedule surprise internal audits as well as employee and management reviews. Audits uncover inconsistencies and remind employees that the company is watching, which can help deter fraudulent activity.
4. Create a security-aware work environment. Support a culture of security from the top down with senior management leading by example and fair employment practices. This kind of positive environment encourages employees to commit to information security.
5. Have a dedicated fraud team with open and ongoing communications. Make sure the workforce understands the consequences of fraudulent behavior such as criminal charges and termination.
6. Ensure there is a comprehensive document management process.  The 2024 Report to the Nations found that 37% of fraudsters conceal their frauds by altering physical documents, and 28% do so by altering electronic documents or files. To help prevent this, a comprehensive document management policy can keep confidential information organized, compliant, and safe. Specifically, documents are identified, labeled, and securely stored until they are no longer needed based on their retention schedule.
7. Provide ongoing security awareness training.  The 2024 Report to the Nations found that 67% of employee whistleblowers had fraud awareness training.
8. Utilize up-to-date IT safeguards on all electronic devices. Layered defense includes two-factor authentication, firewalls, intrusion detection systems, content filtering, encryption, and password protection.
9. Set up anonymous mechanisms to report fraud. Other employees can be a company’s strongest defense. ACFE reports that almost half of frauds were detected by tips and that email and web-based reports both surpassed telephone lines.
10. Embed secure processes into the workplace. Implement a clean desk policy so employees keep their work areas free of exposed confidential data. Partner with a trusted document destruction service, like Shred-it^®, that replaces open recycling bins with locked consoles and schedules regular on- or off-site shredding services for paper and electronic information. A shred-it-all policy can also help prevent fraud by encouraging the regular destruction of all documents.

Shred-it^® has a variety of information destruction services and shredding options to best meet your company’s needs. Learn more about how Shred-it’s^® secure document and hard drive destruction services can help protect your business from occupational fraud.

^{**This article is for general information purposes only and should not be construed as legal advice on any specific facts or circumstances.}