Report: Training, channels, leadership keys to tackling organisational fraud and abuse

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The 2020 ACFE Report to the Nation has been released and with it come some eye opening numbers – and a call to action…

A lot of it we already know: organisations lose about 5% of their revenue to fraud every year; the typical incidence of fraud continues for around 14 months before detection, and causes losses on average of about NZ$1400 per month. 

Also well understood: the efficacy of whistleblower hotlines. Median losses from fraud are nearly doubled at organisations without hotlines, says the report. Similarly, organizations with hotlines detect fraud by tip far more often than those without: almost half of cases are detected by tip when a hotline is present, with small organizations especially likely to detect occupational fraud via a whistleblower hotline. 

Organizations with hotlines also detect frauds more quickly than those without (with the median duration of fraud shrinking from around 18 months to 12 months). 

“Maintaining a hotline or reporting mechanism speeds up fraud detection and reduces losses,” says the report. “Fraud awareness training further improves cultivation of tips through reporting mechanisms.”

Telephone hotline and email are especially important for receiving tip offs. A third of all tips come via those two channels, with another 32% of tip offs coming from online/web-based forms. 

“These findings indicate that whistleblowers’ preferred methods of reporting fraud may be shifting, particularly toward online and in electronic written form. Consequently, organizations should consider maintaining multiple reporting channels to fit the needs of those who submit tips.”

Training also increases the likelihood of detection by tip: Almost half of all cases are detected via “trained” tip off, as opposed to 3% from untrained staff.

Fraud training for employees results in a 38% reduction in losses from fraud, according to the report, with fraud training for managers/executives resulting in a 33% reduction in losses from fraud. The presence of an employee support program further reduces median losses from fraud by 33%. 

“Our data shows that there are clear opportunities for small businesses to increase their protection against fraud,” says the report. 

“Adopting a code of conduct and an anti-fraud policy, having managers review the work of their subordinates, and conducting targeted anti-fraud training for employees and managers are all measures that are correlated with significant reductions in fraud losses, yet each was implemented by fewer than half of the small businesses in our study.”

“Each of these measures can typically be implemented without requiring a significant investment of resources and could help improve the anti-fraud environment of a small organization.” 

Checklist

The report poses the following questions for business leaders looking to create work environments free of fraud and abuse.

Is ongoing anti-fraud training provided to all employees of the organization?

  • Is ongoing anti-fraud training provided to all employees of the organization?
  • Do employees understand what constitutes fraud?
  • Have the costs of fraud to the company and everyone in it—including lost profits, adverse publicity, potential job loss, and decreased morale and productivity—been made clear to all employees?
  • Do employees know where to seek advice when faced with uncertain ethical decisions, and do they believe that they can speak freely? 
  • Has a policy of zero-tolerance for fraud been communicated to employees through words and actions?

Is an effective fraud reporting mechanism in place?

  • Have employees been taught how to communicate concerns about known or potential wrongdoing?
  • Are one or more reporting channels (e.g., a third-party hotline, dedicated email inbox, or
  • web-based form) available to employees?
  • Do employees trust that they can report suspicious activity anonymously and/or confidentially (where legally permissible) and without fear of reprisal?
  • Has it been made clear to employees that reports of suspicious activity will be promptly and thoroughly evaluated?
  • Do reporting policies and mechanisms extend to vendors, customers, and other outside parties?

Download the Report to the Nations 2020: Global Study on Occupational Fraud and Abuse.

 

“Report It Now’s whistleblowing hotline has provided our employees with a secure, independent system where they can report unethical behaviour. In an industry where fraudulent activity can occur, their service has saved us thousands of dollars over the years.”

Restaurant Brands NZ Limited

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