In a survey conducted by the ACFE last year, Certified Fraud Examiners (CFEs) said increased financial pressure was the leading reason fraud increases an estimated 20 percent during the holiday season. Many of these experts believe that employee embezzlement is the most likely type of fraud to increase.
Those surveyed believe the single biggest contributing factor to be increased financial pressure on perpetrators (61 percent), followed by an increased opportunity to commit fraud (24 percent) and increased rationalization for fraud (10 percent). These three factors are represented in criminologist Donald R. Cressey’s “Fraud Triangle” and their presence is considered to be necessary in order for fraud to occur.
Fewer than 7 percent of respondents said their organization increases their level of resources committed to fraud prevention or detection during the holidays. Most said that the level remains the same (56.7 percent), while more than 9 percent said that the level actually decreases.
The ACFE recommends organizations take the following measures to help lessen vulnerability:
1. Be proactive.
Fewer than 7 percent of survey respondents said their organization, or their clients’ organizations, increase their level of resources committed to fraud prevention or detection during the holidays. Be vigilant and put increased emphasis on monitoring internal controls. Maintain a clear segregation of duties, such that one employee is not in charge of multiple levels of cash-handling or inventory control. Emphasize the employee code-of-conduct during the holidays, and/or make clear that the company will not tolerate any unethical behavior.
2. Follow established hiring procedures for seasonal employees.
While many retailers respond to an urgent need in hiring seasonal employees, the same formal employment guidelines should be followed as during other times of the year. These should include conducting thorough background investigations: check educational, employment and credit history (as permitted by law), as well as references.
3. Train employees in fraud prevention.
Full-time, part-time and seasonal employees should be trained in fraud prevention. Are employees aware of procedures for reporting suspicious activity by customers or co-workers? Do workers know the warning signs of fraud? Ensure that staff know at least some basic fraud prevention techniques.
For more information on fraud in the workplace, download our free ebook here or call us at 727-845-4166. Or, if you are in the Trinity, New Port Richey, Land O Lakes or surrounding areas, make an appointment to come visit us.