How to Detect & Prevent Internal Fraud in Your Organization?

Internal fraud is one of the main challenges faced by companies of all sizes. It’s an illegal act characterized by deception, concealment, or abuse of trust. In most cases, employees commit such crimes to get financial benefits and damage a business organization from within. On average, companies all over the globe lose about 5% of their net revenues due to internal fraud. If left unchecked, it might lead to severe financial losses to a business organization, reputational damage, and sometimes bankruptcy. Let’s talk more about it and discuss some ways to fight internal fraud in your company. 

In simple words, internal fraud refers to all dishonest actions taken by employees, managers, or insiders in a company for unfair personal financial gain. It is more damaging than external fraud (committed by outsiders). It’s because it is carried out by reliable and authorized individuals who know the company’s system very well.

They often erase the pieces of evidence of their illegal acts once their goals are achieved. Scams, payroll misappropriation, exaggeration of the company’s financial statements, asset theft, accessing restricted information, etc, are some fine examples of insider fraud. It can take place in any department of the company.

If internal fraud continues and is not stopped immediately in a company, it can cause tremendous losses. The organization may experience a sharp decline in its revenues and face legal issues. A complete shutdown of its business is also possible. 

All business organizations must take concrete steps to fight internal fraud and eliminate it immediately. It will ensure their financial well-being and prevent the possibility of the company’s shutdown. Here are some useful recommendations.

Establish Strict Internal Controls
Lack of internal controls and the supervision of employees’ activities are the main culprits behind the increased cases of internal fraud. Therefore, you must develop a strict internal control policy in your organization.

• Define the roles and responsibilities of all employees in your company. Share access rights (to the organization’s computer, laptop, databases, trade secrets, etc) with them accordingly. Use a dedicated cloud platform for everyday business operations. It will help you to capture data for all activities and identify the early red flags of possible scams by employees. 
• Never allow any employee to use a personal email ID or any other web resource during working hours. 
• Regularly review the incoming and outgoing communication of all employees in the organization. It will help you catch wrongdoers and track internal fraud immediately. 

Conduct Surprise Audit
It is one of the most effective ways to catch and prevent internal fraud in a company. Basically, from time to time, auditors review all activities of the company and its employees without giving any prior notice. Depending on the requirement, they can ask for any record and check its legality. It allows them to catch culprits, expose scams, and prevent large-scale damage.

See the Company’s Financial Records
The desire to get easy money is one of the main reasons that encourages employees to engage in internal fraud. Even the most trustworthy professional can misappropriate the company’s resources, make fake invoices, hide important financial information, etc. Therefore, you should regularly review your company’s financial resources and keep a close eye on incoming and outgoing money. Create an approval mechanism for all expenses. Check whether the expenses are necessary or not. Strict supervision of money movements will minimize the chances of scams in your company.

Encourage Employees To Report Fraud
A company owner can’t analyze all activities of the business organization alone and prevent misconduct. Therefore, you should have a whistleblower policy in your firm. Encourage your employees to secretly report the fraudulent activities of their coworkers with evidence. Investigate the allegations against individuals and take strict action. It will help you catch several cases of internal fraud in your company and prevent large-scale damage.

Adopt a Zero Tolerance Policy
As a business owner, you need to catch internal fraudulent elements and ensure their legal liabilities. Educate your employees about unacceptable behavior in the workplace. Remind them about the consequences if they break the established code of conduct. Never hesitate to punish scammers as per the law. The possibility of the commencement of legal action works as a deterrent against internal fraud. Even the most clever working professionals will refrain from doing anything wrong because of legal consequences.

Leverage Corporate Investigations
A corporate investigation is an effective way to combat internal fraud in business organizations of all sizes. Don’t wander here and there & choose Sky Recoup for an effective corporate probe. Upon authorization, our corporate investigators launch a comprehensive investigation and look for possible scams in your company.

Depending on the complexity of the case, they might use advanced tools and technologies to systematically inspect the entire system of your company. It helps uncover many cases of internal fraud, financial misappropriation, asset theft, etc. With us, it is always possible to find and eliminate internal scams early & avoid big damage to the organization. We also help you recover lost assets. Contact us today regarding your requirement and stop internal fraud immediately with our help.

Companies always face the threat of internal fraud. It destroys them little by little, even without letting them know. Be proactive and take all these measures to find and eliminate the cases of internal fraud immediately. The definition of internal fraud may differ from one company to another. Don’t worry, and take help from us at Sky Recoup in this regard. With prompt action, we may track all instances of internal scams in a company and help protect your organization.