Anti-Fraud Archives - John J. Hall, CPA - Speaker, Author and Consultant

Fraud Prevention Tip #50: The Three Key Components of an Anti-Fraud Program

Somewhere out there, your organization is probably being targeted for fraud right now. Internet-based hackers, international organized crime organizations, and even a small percentage of employees all see your assets and information as too tempting to ignore.

But what are the three most important things you must do to deter these barbarians at the gate – or already inside your business?

How to Prevent Business Fraud: 8 Ideas That Work

The goals of anti-fraud efforts are prevention and immediate detection. While no anti-fraud system is foolproof, the 8 ideas in this program are critical to managing fraud risks in your business. And there is a cumulative effect – the more of them you apply in your business, the greater the chance of success. Providing turn-by-turn instructions for business leaders and owners, this program is short on theory and long on practical ‘how-to’ instructions on what you should do and what gets in the way. You’ll benefit by building a stronger defense against the risks of wrongdoing, misconduct, theft and outright fraud. Using the tools, checklists, talking points, and sample anti-fraud policies included in the program, you’ll be able to apply the ideas right away with minimal cost and maximum effect.

Managing business fraud risks requires your daily attention. It’s a ‘cat and mouse’ endeavor where the smarter we get, the harder they have to work to get us. While there are many prevention and deterrence steps you can take, here are three critical components of any business anti-fraud program.

1. Build a culture of honesty within your organization.

Ethics starts and ends with the actions of leaders. From the boardroom to the factory floor, every leader must not only talk, they must demonstrate exactly what ethical behavior looks like in their business habits. And the CEO must personally lead the pack.

Formalize the rules of acceptable behavior in a Code of Conduct. Be clear about what is not allowed as well. Address confidentiality, harassment, use and protection of intellectual property, avoiding conflicts of interest, and other ethical issues. Tell people what you expect of them. Be clear about relationships with third-party suppliers, customers and contractors.

2. Perform a meaningful fraud risk assessment, and brainstorm how to mitigate fraud risks.

Fraud risk assessment starts with an open discussion of what can go wrong. Bring it out into the open. Recruit every employee into the brainstorming process. Address theft, manipulated financial and operating results, and shadow deals with third parties.

Make sure every employee knows what can go wrong in their areas of responsibility, and tell them it’s their job to make sure fraud doesn’t happen on their watch. Help them implement or strengthen anti-fraud controls. Openly recognize their positive deterrence behavior.

3. Provide useful anti-fraud skills training.

Creating a culture of honesty and ethics is step one; step two is fraud risk brainstorming. But none of it matters without useful anti-fraud skills training.

Many organizations speak to their staff about fraud awareness. But if you are expecting them to fight fraud, you have to go much further and show them exactly what fraud looks like in the transaction records they see every day. There’s simply no short cut to meeting this essential need. Yet this is the one step that most business organizations skip.

Provide anti-fraud skills training in a classroom setting, in small staff meeting discussions, in organization newsletter articles, and using webinar, conference call and other simple technology (Skype, Apple FaceTime and others). Most effective of all but often overlooked is one-on-one coaching of staff by supervisors at every level.

Don’t keep fraud examples hidden from your team; bring what can go wrong out into the light where all can learn and react appropriately. Help them be successful in meeting your fraud risk management objectives. Encourage them to speak up and make it as safe as possible to report suspicions.

If you have questions about what you should do to fight fraud exposures in your organization, just let me know and we’ll talk it through.

Call me at (970) 926-0355. Or email John@JohnHallSpeaker.com and we’ll get the discussion started.

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 38-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

Fraud Prevention Tip #49: How to Deal with Employee Theft

Anti-fraud efforts usually lean towards managing external threats. But your largest exposure is from employees simply because they are already inside your circle of trust.

When we find out that a trusted employee has been stealing from the organization, it can be really difficult to know how to proceed. The theft in question could be anything from taking inventory or supplies for personal use or for resale, adding fictitious costs to travel and other out of pocket reimbursement requests, putting false information on time sheets, engaging in intellectual property theft, or profiting from shadow deals with suppliers, customers or contractors.

THE ANTI-FRAUD TOOLKIT
Let’s be honest. The simple fact that you are considering The Anti-Fraud Toolkit says a lot. It tells me that you are a special person. A true leader in the anti-fraud effort – regardless of your position in the organization chart, your length of service in the business environment, or what your technical specialty areas might be. You are unique in your intention to attack fraud risks – and to do something about it.

Simply put, there’s no one size fits all solution to addressing theft and other fraud by employees. But you have to act. You simply can’t allow the disease of deception to take root in your business.

Here are three suggestions to get you pointed in the right direction.

• Get Help. It’s a rare business leader who has sufficient background in fraud issues to handle cases of employee theft by themselves. Get the help you need to protect all involved, including honest employees. Start with the legal, accounting, human resources and technology experts who are already part of your core business support team. Get advise from qualified professionals – ideally before you’re faced with a fraud event. Outline a comprehensive response plan now before it’s needed. Then execute it objectively should an event be detected.

• Don’t Delay. It’s time to park your disbelief and anger, and get started on taking care of the problem. Employees who steal have no place in your organization. It’s time to stand behind your policies of zero tolerance for cheaters. You’ll need to proceed efficiently and professionally towards a solution that balances the facts of the case with the desire to get it all behind you. But be careful not to let uncertainty and indecision get in the way of what needs to be done. Get help, then take action.

• Learn from What Happened. OK, you got taken by a trusted staff member or manager. It happens, so it’s important to get past the issue at hand and move forward having learned important lessons. Think about how controls could be tweaked without getting in the way of efficient business practices. Analyze how you could be a better overseer of transactions and activity without holding up progress. Recruit your honest employees into a stepped up campaign to make sure it never happens to you again.

When trusted employees steal from the organization, it violates everything you and the many other honest team members hold dear. Out of respect for the honest majority, get help, take action, and adjust daily practices based on lessons learned.

John J. Hall, CPA

November 16, 2015 | John Hall | anti-fraud • Association of Certified Fraud Examiners • audit committee • Code of Conduct • controls • employee theft • employees • fraud deterence • honest employees • management • misconduct • risk management • Suspicions | Anti-Fraud |

Fraud Prevention Tip #48: Suggestions for Small Businesses, Small Government and Not-for-Profits

The Anti-Fraud Toolkit Structure
In 9 modules, more than 6 hours of recorded video lecture, over 250 PowerPoint slides, and many practice ‘To-Do’ action items and practice tools (downloadable in each module), you’ll get the step-by-step, turn-by-turn instructions you need to take action right now. Short on theory and long on action steps, the lectures and tools in each module will enable you to take confident, effective action by building on the successes I’ve witnessed in my clients all of these years.
You’ll also get guidance on what not to do in the fight against fraud – to help you avoid common mistakes, focus your precious limited energy, and avoid undermining your own efforts through inefficiency and uncertainly!

Most smaller businesses, local governmental entities, and not-for-profits face the inherent risk of insufficient staff and limited control resources. These special challenges require extra effort by anti-fraud leaders. Here are seven ideas that will help.

Create a written Code of Conduct that addresses routine and non-routine situations staff will encounter in performing their work. Provide examples, short cases and answers to Frequently Asked Questions. Be wary of boilerplate terminology. Focus instead on meaningful real-world guidance for conduct.
Due to limitations in staffing and inadequate segregation of duties controls, managers should compensate by spot checking and re-performing the work of subordinates. Make this ‘quality check’ a daily habit.
Require that approvers carefully review all disbursement documentation prior to approval. Verify details, ask questions, and when in doubt, choose to follow up until a valid verifiable conclusion is reached.
Have organization bank account and credit card statements sent unopened directly to the chief executive. This executive should review all statements in detail as soon as they are received.
Verify the existence and legitimacy of all first-time payment recipients.
Make everyone take uninterrupted vacations or other time away from their jobs. Have other staff fill in for them and complete their work while they are away. This practice builds skills and acts as a deterrent to wrongdoing.
You simply must perform meaningful criminal background checks on employees and higher-risk volunteers. There’s no easy way around this one. Those terminated for cheating at prior employers know they need a new job right now. No delay. And prime targets for new jobs for these folks are the smaller business, governmental entity or not-for-profit that everyone knows has limited resources and staff to check backgrounds.

Comply with the privacy, anti-discrimination and other applicable laws. Beware of blanket policies that prevent hiring those with prior criminal records. Get competent legal advice and find a way to get these reviews done

John J. Hall, CPA

November 12, 2015 | John Hall | anti-fraud • Code of Conduct • controls • detection • deterrence • fraud deterence • fraud prevention • habits • management • planning • risk management | Anti-Fraud |

Fraud Prevention Tip #47: What to Say to Employees

A fraud incident has surfaced. The suspect is an experienced and respected senior manager. The rumor mill is in full operation. The internal grapevine is filled with wild assumptions about what happened and who was involved.

But all that’s available from senior leaders is silence. They are in bunker-mode hidden behind closed doors. No one is saying anything – so the conjecture runs without resistance or correction. Executives and employees are equally frustrated and confused about what to do.

A business associate once suggested that the most powerful word in the English language is ‘balance’. Balance is about restoring order. About looking at all issues in a tough situation and coming up with a solution that works best if not perfectly. And in the case of what to say or withhold from employees when a fraud has been found, balance needs to be the order of the day.

As you consider what to tell employees, here are some suggestions based on my own past experience.

Our first priority is protection of the innocent, including the important efforts you’ll certainly take to protect the reputation of suspected fraudsters.

But the employees deserve to learn from the experience so that it doesn’t happen again. So we need to find a time and place to release as many of the details as are needed to provide that learning experience. Emphasize what happened, what it looked like in the records, and the lessons learned from the experience. In many cases, all of that can be accomplished without actually saying the name of the person who committed the fraud.

In addition, every employee, supervisor and manager wants to believe that they work in an environment where those who violate the code of trust will be held accountable. They want their leaders to be fair but firm in dealing with those who commit wrongdoing. Honest employees should feel confident that investigative efforts are professional, fair and respectful. But they also want to see the perpetrators removed from the payroll without learning later that the thief or fraudster was given an incentive payment or other inducement to go away quietly. (Yes, it happens. Often.)

As any investigation gets underway, always be thinking about what can and should be told to other employees who have a right to know. Come up with a way to make sure that the lessons of fraud schemes can be used to educate all employees. That’s the way to enhance their anti-fraud efforts and reinforce their prevention behaviors.

John J. Hall, CPA

November 9, 2015 | John Hall | fraud prevention | Anti-Fraud |

Fraud Prevention Tip #46: What To Do If The Press Finds Out

It’s every executive’s nightmare. There’s been a big fraud and the press is calling with questions. Efforts to contain the issue internally have obviously sprung a leak, and now the difficult decision has to be made about what to say to the press.

As with all decisions covering any organization information to make available to outsiders, developing guidelines and protocols on handling the press should be addressed during periods of calm when no fraud issue is being pursued.

Here are a few variables to consider as you develop your own plan.

1. Be clear about who is authorized to speak with the press.

2. Make just as certain that all other employees know that they are not authorized to do so. Everyone should know how to refer press inquiries to the correct leaders.

3. When speaking with the press, be explicit. If the decision is made to reveal details, then be very explicit and stick to the facts. Avoid being pulled into conjecture by experienced reporters who are highly skilled at pushing ‘what if’ and ‘what else’ questions during interviews.

4. Craft the basics of your message in advance. Creating the framework of your generic message helps with decisions made in the heat of the moment.

5. It’s OK to smile politely and walk away. To say nothing – not even “No comment” (which automatically sounds like you’re hiding something!)

Would your leaders be ready to talk to the press tomorrow if a fraud surfaced today? Would you?

If not, start the discussion now. Don’t wait until it’s an emergency.

John J. Hall, CPA

November 5, 2015 | John Hall | fraud prevention | Anti-Fraud |