Fraud Prevention Tip #18: Daily Preventive Behaviors

Fraud has many names: embezzlement and theft, financial manipulation, kickbacks and other shadow deals, misconduct, and outright wrongdoing. But in 90% of the cases I’ve touched over 37 years, there was one thing in common: formal control procedures without the related human competence and daily attention to detail created false security about fraud prevention.

Anti-fraud daily behaviors by informed managers and staff are the critical missing link in most efforts to battle wrongdoing. And few organizations are doing anything about it.

Effective anti-fraud behaviors include three specific actions:

1. Pausing at the moment of transaction approval to think, “How do I know that what I’m reviewing right now is correct?” This is The Anti-Fraud Moment. “How do I know” – or HDIK? – becomes the mantra of those who take pride in their approval signature.
2. Choosing to ‘doubt’ when something doesn’t look or feel right. Doubters double check details as a quality step: not just as an anti-fraud step. (And Doubters make great supervisors!)
3. Resolving or referring suspicions. Refuse to sign any document that looks funny to you until you know it’s correct. Resolve what you can; quickly refer any suspicions you can’t resolve to the experts who specialize in Fraud Prevention and Detection.

If all managers and staff would just take these three simple steps every day, most fraud risks go away.

But here’s where this process breaks down. Employees care. They want to do the right thing. But they simply do not know how.

Here’s an example:

Frustration oozed from Jim’s expression. He had just completed the required Policy on Anti-Fraud Responsibilities annual certification acknowledging that he was responsible for preventing fraud in his department. “I’m willing!” he said to himself. “But no one has ever taught me what fraud looks like in what I see.”

The fix, of course, is meaningful Anti-Fraud Skills Training. Not just awareness sessions. Real skills training that includes examples of exactly what wrongdoing and fraud look like in documents managers and staff see each day.

The best and most cost-effective training comes directly from supervisors who coach their team in what can go wrong and exactly what it looks like. This coaching includes setting the right tone about what’s expected, and encourages every employee to speak up immediately when anything doesn’t look right.

To help you in your anti-fraud efforts, here’s a quick summary checklist you can share with others. Tell them, “We deter fraud when we:

1. Pay attention and question details
2. Know before approving
3. Hold others accountable for results
4. Enforce the rules
5. Enforce documentation standards
6. Ask, count, inspect, double-check
7. Balance, reconcile and review
8. Are passionate about quality
These same steps can be applied to any risk – not just fraud.

Knowing what to look for, paying attention each day, and speaking up are the fundamentals of any quality or process improvement effort. And that makes fraud prevention behaviors part of the normal workflow; not extra work.

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.”