International Fraud Awareness Week, taking place from 14-20 November, highlighting an increasing problem that organisations around the world are facing. According to the Association of Certified Fraud Examiners (ACFE), businesses lose around 5% of their annual revenue globally due to fraudulent behaviour, which experts estimate amounts to a total annual loss around the world of $3.7 trillion.
Fraud can hit organisations from various angles, and even though cybercrime and external fraud attacks are a huge risk, more often than many companies realise it is perpetrated from within. In fact, the Global Economic Crime and Fraud Survey showed that 41% of economic crimes in South Africa were committed by employees, compared to only 36% by external fraudsters and 21% a collusion between the two.
Ryan Mer, Managing Director, eftsure Africa, a Know Your Payee (KYP) platform provider says it is crucial to be alert to fraudulent activity within your organisation and to catch it as early as possible. To do this, you need to understand what drives employees to engage in fraud. “From our experience and conversations with clients when assisting those who have dealt with fraud internally, employees do not set out to defraud a company and it is usually someone who has been with the company for some time and someone who is seen as unlikely to participate in criminal activity.”
Criminologist Donald Cressey published a model called the ‘fraud triangle’, which outlines the three factors that can cause employees to commit occupational fraud: motivation, opportunity and rationalisation. When an employee has a reason for committing fraud, gets a chance to do so without getting caught, and can come up with a justification for their behaviour, they’re more likely to commit an occupational crime. “The past two years of COVID-19 lockdowns have negatively impacted household finances, providing ample motivation and justification for committing fraud. In the minds of many, desperate times call for desperate measures. Organisations need to be cognisant of this and act accordingly,” advises Mer.
Some of the warning signs exhibited by employees that may indicate fraudulent behaviour include:
How to prevent fraud
By looking at the three factors in the ‘fraud triangle’ mentioned above, business owners can help to prevent employees from resorting to fraud.
In the current economic climate, employees may be more tempted to perpetrate fraud, making it vital for organisations to implement best practice anti-fraud strategies. “People combined with technology and sound business processes are at the frontline of fighting fraud and mitigating risk. By building a culture of security within an organisation that ensures cooperation between employees and technology, it is significantly more difficult for employees to commit white-collar crime,” says Mer.