These types of Facebook posts could point to an employee being a fraud risk

Incidents of fraud are on the rise in South Africa, with statistics by the South African Fraud Prevention Service indicating that new fraud listings had increased by 56% in 2017.

This is according to Keeran Madhav, director of Forensics at Mazars, who points to a 2018 global study released by the Association of Certified Fraud Examiners (ACFE) which found that nearly half of all fraud incidents were made possible by weaknesses in the internal controls of the businesses being targeted.

Madhav says that one of the main reasons why a company’s anti-fraud controls may be weak is because the controls are not proactive or robust enough.

“Being proactive means that the company puts measures in place that detect fraud before any visible warning signs present themselves,” he said.

“This includes conducting surprise audits, and instituting a fraud hotline, conducting fraud risk assessments and proactive data monitoring, for example. The median loss of companies who implemented anti-fraud controls was on average 12% to 56% lower.

“In terms of robustness, a company’s fraud controls need to be able to evolve and adapt as the nature of fraud in the industry changes. To ensure that anti-fraud measures are indeed robust enough, it is vital to re-evaluate anti-fraud controls and programmes on a regular basis to see which aspects need to be updated,” he said.

Madhav said that some of the most important controls that need to be present in every organisation include a clear code of conduct, robust anti-fraud policies, and proactive data monitoring.

“There also needs to be a clear message or tone from the top levels within the organisation regarding the company’s ethics and attitudes towards any type of occupational fraud and dishonest dealings,” he said.

Combatting fraud

Madhav said that the ACFE’s report has shown that of all the anti-fraud measures, fraud hotlines that allow employees to report irregularities anonymously, have shown some of the best results.

“The report shows that 42% of all cases were first brought to light as a result of telephone hotlines. This is the highest of all the channels, including email and online platforms. Fraud losses were also 50% smaller for organisations with fraud hotlines than those without.”

Lastly, Madhav states that employee behaviour is also an important indicator of possible fraud, which is why business owners and senior managers need to be alert for possible red flags in employees.

According to the report, corruption was the most common fraud scheme in every global region with 70% of the cases perpetrated by someone in a position of authority and with a usually close association with a vendor or customer.

He said that, especially with management level employees, it is important to go the extra mile to see whether they have any relationships with clients and other stakeholders beyond the scope of their work.

“For this, it helps and where permitted to keep an eye on the social media activities of employees that may pose a potential fraud risk within the business.

“It also warrants further investigation if you see that certain employees are living beyond their means, individuals saddled with bad debt, or employees who show signs of substance or gambling addictions.”

Read: New ‘money bomb’ scam targets South Africans at ATMs

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These types of Facebook posts could point to an employee being a fraud risk