Curbing organisational fraud requires a combination of awareness, education and enforcement, says Anna Collard, SVP of Content Strategy & Evangelist at KnowBe4 Africa
Marking International Fraud Awareness Week this week, Collard says: “Fraud is one of the most common causes of financial losses from organisations around the world, with an estimated 5% of annual revenues lost to fraud. And fraud is not limited to large enterprises: according to the Association of Certified Fraud Examiners (ACFE) 2020 Report to the Nations, certain fraud risks, including billing and payroll fraud and check and payment tampering, are more likely in small businesses than large organisations. Even non-profit organisations are susceptible to fraud, mostly due to corruption, billing and expense reimbursement fraud.”
To curb fraud, Collard believes it is important for organisations and their employees to be aware of the reasons people commit fraud, and the common red flags that should arouse suspicion.
“People commit fraud for a range of reasons – they may be under financial or personal pressure, feel a need to live the high life or perform better than their peers; and they may see an opportunity and rationalise their taking advantage of it by thinking they deserve to take something from the company, or that they intend to pay it back,” she says.
“There are common red flags that should alert companies and colleagues to take a closer look at the potential for fraud,” she says. “These include people going through a dramatic life event such as divorce or financial difficulties, or people suddenly living beyond their means. In fact, the ACFE report indicates that 42% of occupational fraudsters were living beyond their means, and 26% were experiencing financial difficulties.” Collard notes that other red flags include an unusually close association with a vendor or customer; unusual irritability or suspiciousness, an unwillingness to share their duties and a tendency to work late and never take leave.
Most of the occupational frauds are committed by people with the opportunity – those in operations, accounting, upper management, sales and customer service, and most of them are committed by people who have worked in an organisation from one to five years – long enough to have spotted weaknesses in the internal controls. Those who had worked at the organisation for at least six years caused twice the loss of less tenured employees, the ACFE report found. Sixty-four percent of occupational fraudsters had a university degree or higher, and most have no criminal history.
“To the untrained observer, a highly educated long-serving employee may seem to be the last person you’d expect to commit fraud; but this is not the case,” says Collard. This is why it is crucial that organisations implement fraud awareness and training programmes, and ensure that the appropriate reporting mechanisms are in place.”