13 November 2019 by Dispute Resolution Alert

Corporate Investigations: Gearing up for International Fraud Awareness Week

International Fraud Awareness Week (Fraud Week) kicks off on 17 November and ends on 23 November 2019. This is an opportune time for every organisation in the country to consider the importance of raising fraud awareness among their employees.

Fraud Week was established by the Association of Certified Fraud Examiners (ACFE) in 2000 as a dedicated time to raise awareness about fraud. This week-long campaign is part of a global effort to minimise the impact of fraud and white-collar crime around the world.

Occupational fraud has been identified by the 2018 ACFE Report to the Nations (ACFE report) as the most prevalent threat to organisations. According to the ACFE Report, South African businesses lose an estimated 5% of their revenue annually due to fraud. Furthermore, the 2018 Global Economic Crime and Fraud Survey that was conducted by PWC South Africa revealed that 77% of South African organisations have experienced economic crime over the last two years. This figure is higher than the global average of 49%. Fundamentally, the significance of Fraud Week is to highlight the scourge of fraud in organisations and to discuss ways in which organisations can take proactive steps to mitigate the risk and effect of fraud.

The ACFE report defines occupational fraud as fraud that is committed against the organisation by its own officers, directors or employees which constitutes an attack against the organisation from within. Fraud can have drastic financial consequences as it is perpetrated by the very people who are entrusted to protect an organisation’s assets and resources. Fraud can also cause insurmountable damage to an organisation’s reputation. Fraud Week is a great opportunity for an organisation to assess or reassess the measures it has in place to prevent, detect and effectively combat fraud.

Mitigating the risk of fraud does not necessarily involve implementing complex processes and procedures. There are numerous practical measures that an organisation can take in order to protect itself from fraud. The following ACFE checklist can be used by an organisation to assess the effectiveness of its fraud prevention measures:

  • Is there ongoing anti-fraud training provided to all employees in the organisation?

  • Is there an effective fraud reporting mechanism in place?

  • Is possible fraudulent conduct aggressively sought out and investigated?

  • Is the tone at the top one of honesty and integrity?

  • Are there fraud risk assessments performed regularly to proactively identify the organisation’s vulnerabilities to fraud?

  • Are there strong anti-fraud controls in place that operate effectively?

The above list of questions is by no means exhaustive. Each organisation will be guided by various factors such as the size of the organisation, the nature of the business conducted by the organisation and the risk that the organisation faces. The ACFE Report has, however, shown that whistle-blower tips are the most common method of detecting fraud. Establishing a mechanism for whistle-blowers to report any irregular behaviour is an important step to take in order to weed out fraud.

There are also various initiatives which organisations can take part in during Fraud Week. The ACFE advises organisations to seek advice on the measures to implement to protect businesses. Business leaders are encouraged to raise awareness about the impact and effect that fraud has on businesses. Organisations can host training opportunities, distribute anti-fraud information or promote anti-fraud activities during Fraud Week.

The commitment to preventing fraud should not stop when Fraud Week ends. Organisations need to remain vigilant at all times and provide regularly scheduled anti-fraud awareness training to employees, evaluate fraud policies and communicate the policies to employees on a regular basis. Successfully combating fraud begins with being sufficiently prepared to prevent and to detect fraud before it is too late.

For more information about Fraud week, visit https://www.fraudweek.com/.

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