Fraud Prevention Tip #12: Issue a “Policy on Fraud Responsibilities”

Here’s a challenging question from a recent client meeting. “John, what are the three most important components of an Anti-Fraud Campaign?”

In this series of articles, you’ll read 40 ideas for action. But the top three? That’s easy.

• Number one is Visible, Vocal, Active Support by the CEO. This was covered in a previous article. But here’s a summary of the four key points:

1. The #1 executive must lead the anti-fraud charge.
2. They must be willing to speak publicly and enthusiastically about the initiative.
3. They must provide you with the resources you need to initiate and sustain the Anti-Fraud Campaign.
4. They must embrace the belief that fighting wrongdoing and fraud is a campaign waged over time with their continued support. It is not a once and done event that receives encouraging words but no meaningful follow-though a few weeks or months later.

• Number two we cover right here. Issue a Policy on Fraud Responsibilities.

• Number three – give all employees meaningful Fraud Risk Management Skills Training – we’ll cover in a future article in detail, so stay tuned.

“You can achieve so much by simply doing what you can – right here, right now.” As a fact-based businessman and Certified Public Accountant, I like the world to make sense. I’ve spent many hours with corporate leaders, company owners, and other hard working men and women discussing their challenges and goals. I’ve seen hundreds of people reach their goals – and just as many fail. And there’s a pattern!

I’ve always been a fan of the old expression “one-two punch”. But I REALLY like the idea of a “one-two-three knock-out punch combination”. These three ideas give you just what you need to knock out fraud in your organization.

Critical Components of a Policy on Fraud Responsibilities

A Policy on Fraud Responsibilities is not the same as a Code of Conduct (although there may be some overlap). The Code states what to do and what to avoid in conducting business.

A Policy on Fraud Responsibilities is positively-worded ‘call to action’ that explicitly recruits every employee, manager, executive and Board member to your Anti-Fraud Campaign. Here is the minimum content I would want to see.

Our goal is to establish and maintain a business environment of fairness, ethics and honesty for our employees, our customers, our suppliers and anyone else with whom we have a relationship. To maintain such an environment requires the active assistance of every employee and manager every day.

All have a responsibility to report suspected violations.

However, employees with supervisory and review responsibilities at any level have additional deterrence and detection duties. Specifically, personnel with supervisory or review authority have three additional responsibilities.

• First, you must build and maintain awareness of what can go wrong in your area of authority.
• Second, you must put into place and maintain effective monitoring, review and control procedures and behaviors that will prevent acts of wrongdoing.
• Third, you must put into place and maintain effective monitoring, review and control procedures and behaviors that will detect acts of wrongdoing promptly should your prevention efforts fail.

Authority to carry out these three additional responsibilities is often delegated to subordinates. However, accountability for their effectiveness cannot be delegated and will remain with supervisors and managers.

Be sure to emphasize required reporting of suspicions. Fraud Risk Management experts should handle suspicions; not employees and supervisors.

And if it’s consistent with your culture and policies, take it a step further and require annual certification where every employee states that they are not aware of or suspect wrongdoing by others.

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 35-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.”