This is International Fraud Awareness Week.

Established by the Austin, Texas-based Association of Certified Fraud Examiners, the weeklong campaign encourages business leaders and employees to take steps to minimize the impact of fraud by promoting anti-fraud awareness and education.

The association estimates that businesses around the world lose 5% of their annual revenues to fraud — or more than $3.5 trillion in U.S. dollars.

A single instance of fraud can be devastating: the median loss per fraud case in the association's 2014 Report to the Nations on Occupational Fraud and Abuse study was $145,000. More than a fifth of the cases involved losses of at least $1 million.

Independent insurance agencies and brokers need to guard against fraud in their own offices, but more importantly, they need to help their small and mid-size business clients do the same.

Here are some basic steps you can share with your clients that they can take to lessen their vulnerability to fraud:

Be aggressive. Adopt a code of ethics for management and employees. Evaluate your internal controls for effectiveness and identify areas of the business that are vulnerable to fraud.
Establish hiring procedures. When hiring staff, conduct thorough background investigations. Check educational, credit and employment history (as permitted by law), as well as references.
Train employees in fraud prevention. Do workers know the warning signs of fraud? Ensure that staff members know basic fraud prevention techniques.
Implement a fraud hotline. Fraud is still most likely to be detected by a tip. Providing an anonymous reporting system for your employees, contractors and clients will help uncover more fraud.
Increase the perception of detection. Communicate regularly to staff about anti-fraud policies, ways to report suspicions of misconduct, and the potential consequences (including termination and prosecution) of fraudulent behavior.

Insurance fraud graphic

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5 steps businesses can take to fight fraud

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