Fraud is a constant reality for all businesses, affecting organisations of all sizes and across all industries and sectors. Having a fraud policy demonstrates the organisation’s commitment to maintaining a robust culture of integrity and ethical behaviour.

The complex and evolving cyber-threat environment also poses a significant risk, and the following recent statistics highlight the increasing vulnerability of businesses to fraud and corruption:

• 47% of Australian businesses suffered some form of fraud between 2018 and 2020, resulting in a total of some AUD$60 billion in aggregate losses.
• Although measuring the financial cost of fraud is challenging, it is estimated to range between AUD$5-25 billion per year.
• 72% of respondents reported that the risk of fraud and corruption had increased during the pandemic.

These economic impacts reinforce the need to double down on efforts to detect and address fraud. While there is no fool-proof method to prevent fraud, the fraud risk can be minimised by taking a systematic and considered approach to its management.

A key strategy to deal with fraud is an organisation’s fraud policy which is designed as a guide to its prevention, detection and investigation activities.

When considering a fraud policy, here are some key things that stand out to me: 

Why?

A fraud policy is implemented to detail an organisation’s approach to fraud prevention, managing fraud risk and enhancing integrity. It raises awareness among employees that response plans have been devised to deal with and minimise the damage caused by any fraudulent attack. By explicitly defining actions that constitute fraud, organisations ensure that all employees and third parties are aware of what is and is not acceptable. This contributes greatly to the development of an anti-fraud culture which only strengthens the organisation’s defence against fraud.

Who?

Management has the responsibility to ensure fraud risk assessments are conducted and fraud prevention strategies are implemented. The policy communicates to employees that fraud will not be tolerated, and encourages them to exercise diligence, probity, and the highest standard of ethics in the workplace. Further guidelines also assist employees in making decisions about reporting allegations of fraud, corruption, and other criminal offences.

Employees can only be expected to comply with policies when they are clearly set out in a comprehensive up-to-date manner that details the procedures to be followed. Where no such document exists, it is often difficult to prove that employees or external parties have knowingly committed fraudulent actions.

What?

A poor policy design can lead to the creation of significant fraud vulnerabilities. Taking a ‘zero tolerance’ approach to fraud when developing and implementing policies can help organisations put appropriate controls in place to frustrate most fraudulent acts and prevent systemic fraud. A simple, focused and easily understood fraud policy is a cost-effective way of demonstrating the organisation’s commitment to:

• Actively preventing, detecting and investigating fraud.
• Protecting and promoting proper use of property.
• Maintaining and improving fraud prevention controls.
• Detecting and investigating unlawful use of computers, vehicles, telephones and other property or services.
• Detecting and investigating bribery, corruption or abuse of office.
• Referring offenders for criminal prosecution where there is sufficient evidence.
• Seeking civil, administrative or disciplinary sanctions where a case of fraud has been proven.
• Recovering proceeds of fraud.

Designing a strong fraud policy with these key elements empowers the organisation to be in the best position to detect, manage and respond to any threats.

Fraud is a challenge that is both persistent and continuing to evolve – and it is showing no sign of reducing any time soon. Organisations must remain as vigilant as ever by ensuring their fraud countermeasures are effectively mitigating the risks, while at the same time having the flexibility to adapt to change.

If your fraud countermeasures need a health-check or an uplift, reach out to Anchoram Consulting for a no-obligation chat about your fraud policy.