A Small but Powerful Fraud Safeguard

Pop Quiz: What are the five top fraud detection methods for an organization?

Answer:

1. A Tip
2. Management Review
3. Internal Audit
4. Account Reconciliations
5. By Accident (Yep, just like how many of our most awesome products were invented totally by accident)

This statistic was published in the 2014 ACFE Report to the Nation.

Of the five, the Tip is the most effective, because a tip is used more than twice as often as any of the other methods. Often employees, those with the most insider knowledge, will report unethical or unlawful behavior through the tip hotline.

What makes this even better is that the system is so simple to put in place. No specialized knowledge is required to establish the process. All you need is a hotline and someone to do proper follow up. At first, it was shocking to me to find that, of the organizations victimized by fraud outlined in the Report, almost half of them did not have a hotline established to receive tips.

But then, corporations behave a lot like people since after all, they’re composed of people. And people don’t do a lot of simple things they know they should do – like exercising or flossing regularly.

So in a way, not establishing a hotline is kind of like not having a good personal grooming routine.