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.
Related: 5 steps to avoid internal fraud