- Fraud, by its very nature, does not lend itself to being scientifically observed or measured in an accurate manner. One of the primary characteristics of fraud is that it is clandestine, or hidden; almost all fraud involves the attempted concealment of the crime.
- Certified Fraud Examiners estimate that seven percent of revenues are lost as a result of occupational fraud and abuse. Applied to the U.S. Gross Domestic Product, this translates to losses of approximately $994 billion or about $6,000 per employee.
- All occupational frauds fall into one of three categories: asset misappropriations, corruption, or fraudulent financial statements.
- Occupational frauds were most often committed by the accounting department or upper management.
The first step is to have a general awareness of common schemes.
Small businesses are not immune to the work of scammers and it’s important for owners to get educated and then share what they learn with their employees so they can identify and thwart any attempts to defraud your business.
According to the ACFE study, check tampering and fraudulent billing are the most common small business fraud schemes.
To that end, Bank of America recommends eliminating paper checks: “The more checks there are circulating for your company, the greater the chance they may be intercepted, duplicated or manipulated by a fraudster.” Use of an Automated Clearing House and direct deposit can help. “With direct deposit, you eliminate checks written to consumers for payroll, reimbursement and insurance,” says Bank of America. “Both tools can help prevent criminals from gaining access to accounts and from altering or counterfeiting checks.”
If you must use paper checks, create a lockbox. “If you have a hundred accounts sending you a check every month you have a hundred opportunities for financial fraud,” notes Bank of America. “With lockbox, all checks are directed to a third party — eliminating the fraudster’s opportunity.”
Even if customers are using credit cards, there are still plenty of schemes, especially when there’s no physical plastic. “When a card is not present,” warns Visa in a fraud prevention guide, “your fraud risk rises.” Visa adds: “You could end up with lost revenue, higher operational costs, and potentially even your ability to accept payment cards.