Corporate fraud is on the rise and companies of all sizes need to take better steps to prevent it. Addressing delegates at Baker Tilly International’s annual North American conference, held this week in Louisville, Kentucky, reformed 1960’s fraudster Frank W. Abagnale – subject of the movie Catch Me If You Can – repeated his often used quote:
“What I did in my youth is hundreds of times easier today. Technology breeds crime.”
The evidence is irrefutable. According to a 2012 report by the Association of Certified Fraud Examiners (ACFE), it is estimated that organisations lose 5% of their total revenue to fraud, which translates into a staggering global annual loss of $US3.5 trillion.
Alyssa G. Martin, Head of Risk Advisory Services at Weaver and Chair of the Baker Tilly International Corporate Governance Risk Management Committee, said:
“From the mailroom to the boardroom, fraud in the workplace is alive and well, thriving in the on-going economic downturn.
“Rapid recent advances in technology mean that corporate fraud and the art of preventing it have evolved. Technology has on one hand made it quicker and easier to find and analyze data, speeding up the process of criminal investigation, but on the other it has also made the world a much smaller place, which in many cases gives an advantage to the fraudster.
“Now, more than ever, it is imperative that companies consider fraud implications and implement preventative measures. To help meet this need, Baker Tilly International member firms are intensifying their focus on the delivery of high-quality advisory services to companies around the world.”
Prevention is key
Prevention is the most cost effective approach to fraud management – losses resulting from fraud are almost impossible to recoup.
A focus on improving internal controls is vital. This starts with a risk assessment – which should be repeated on a regular basis – to uncover possible fraud schemes and scenarios, evaluate control design and operations and serve as the basis for a deterrence plan. Other fraud prevention measures should include: ensuring appropriate segregation of employees’ duties; performing regular internal audits to deter fraud; implementing effective IT controls; and establishing checks and balances for on-going monitoring
Ultimately, it is very difficult to stop a determined fraudster but a company must make it as hard as possible for them to succeed. And, should the worst case present itself and a fraud be detected – have a process in place to be able to respond quickly and minimize the damage