Fraud Prevention: How to Protect Your Company Against Fraudulent Employees

using a ball pen

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email
6 MIN READ

Employee fraud is a consequential problem faced by organizations of all types and sizes around the world. While you would like to believe that your employees are loyal and working for the greater good of the organization (and most of them probably are), there are still many reasons why some employees commit fraud.

According to results from the 2020 Global Economic Crime and Fraud Survey by PwC, it showed that fraud incidents in the Philippines have not diminished in the past two years. Majority of these fraudulent activities amount to an average of $100,000 per organization in a year. The PwC data showed that the biggest fraud incidents in the Philippines are carried out by employees who have been working in the organization for almost half of their life.

The long-term impact of these incidents contribute to a severe loss of public trust, damage to the brand’s reputation, credit loss, and low company morale. How do you ensure your company doesn’t suffer the same consequences?

The answer is simple: through employee fraud prevention.

business meeting, meeting, business

What is fraud prevention?

Fraud prevention is the implementation of strategies to detect fraudulent activities, especially transactions and banking actions, and prevent these from causing damage to the finances and reputation of a company.

The most appropriate employee fraud prevention strategies and solutions vary depending on the transactional environment of an organization. However, there are general best practices in fraud prevention and one of the most important is identifying vulnerabilities head on. This is best conducted by gathering relative information on fraud risks from various sources within the company and industry. This enables management to determine the totality of fraud risks threatening the organization, as well as the impact of opportunities, incentives, pressures and rationalization that lead to fraud.

However, if you want to practice fraud prevention that’s proactive and effective, the best way to pre-empt employee fraud is to start with your hiring process.

For more information and inquiries about employee fraud prevention and preemployment tests, don’t hesitate to contact Aptitude today.

Employee fraud prevention during HR recruitment

How to prevent employee theft and frauds in your business?

As they say, an ounce of prevention is better than a pound of cure. When it comes to employee fraud, no truer words have been said. Recovering from employee fraud is sometimes nearly impossible, if not incredibly taxing. So if you want to prevent problems rather than try to cure them, it’s best to start from the roots: your hiring process.

Here are some fraud prevention strategies your recruitment team can easily implement in their methods.

Hire Slow

Each time you hire a new employee, you’re taking a risk. So when you receive an employment application, obtain as much information about the candidate as you can. Validate that an applicant is who they say they are with appropriate documents. Verify that the education and credentials they claim to have on their resume are accurate and tree. Ensure that their police records are clean and that they don’t have disciplinary offenses from their previous employers, especially regarding theft.

For the banking and finance sectors, ask candidates to submit personal credit reports. This is good practice, regardless of whether or not the candidate will be handling cash or money as part of their duties. But this is especially crucial for positions such as treasurers, tellers, and auditors.

If the candidate has credit or financial problems in their personal lives, you can’t rule out the reason that it will bleed into their job and professional performance. You don’t want to be a victim of your employee’s problems.

Fire Fast

Theft can be in the form of stealing money, supplies, inventory, faking accounts, and one of the most common forms — stealing time. Too often, organizations end up paying employees for time not worked. These are all forms of dishonesty and if it goes unnoticed, your losses will just keep mounting higher and higher.

When noticed, immediately fire the perpetrators to prevent employee theft from worsening. Make sure you have undeniable evidence so the employee cannot defend their wrongdoing. Employee fraud, theft, embezzlement is either black or white. You should not tolerate it within your organization unless you want others to follow in their footsteps.

Call All References

Verify the truth and accuracy of all the information and details on the job application. If you uncover any misrepresentation, exaggeration, or outright lies on the CV or resume, throw it away and move on to the next applicant. If a candidate lies during the recruitment process, they will most likely lie again once they are hired.

Most employers and HR teams ask for educational background and degrees. How many recruiters actually call the college or university to verify if the degrees stated by the applicant on their resume are legitimate? Very few.

Trustworthy, reliable people have nothing to hide and will be honest with everything they state and represent. Fraudulent employees, on the other hand, will prey on an employer’s weaknesses and try to get away with dishonest behavior for as long as they can. For effective fraud prevention, call the Registrar of the college. They can verify for you if the candidate actually attended their institution or not, whether they actually graduated, and the degrees they earned.

You can also try contacting an applicant’s previous employers. A great question you can ask is: “Would you hire this person again?” The answers will enlighten you and guide you in making a decision. After all, if a previous employer won’t hire a candidate back with skills and experience, why should you?

Invest in Integrity Testing

If you truly want an effective fraud prevention system in your recruitment process, it’s best to invest in integrity test for hiring. An integrity test will help prevent employee theft and employee fraud and protect your company from dishonest individuals. A typical integrity assessment measures the following:

  • Trustworthiness
  • Rules Compliance
  • Non-violent attitude
  • Accountability
  • Candidness

However, the scope of integrity testing reaches far beyond ascertaining a candidate’s probability to lie, steal, or commit fraud. In fact, measuring integrity can form a holistic assessment of an applicant and be a key indicator for determining other aspects of their character such as trustworthiness, dependability, values, and work ethic.

Integrity assessments also benefit organizations on many levels, not just fraud prevention. They offer objective predictions on a candidate’s job performance compared to unstructured interviews and can be valid predictors of absenteeism and counterproductive behavioral tendencies. They also allow for better culture fit matching as they can determine an individual’s resistance to managerial direction and measure predispositions towards rules of engagement.

For more information and inquiries about preemployment tests, don’t hesitate to contact Aptitude today.

Other fraud prevention practices to implement

Aside from the recruitment process, here are other ways you can prevent fraud from occurring within your organization:

Implement internal controls

Internal controls are plans you can implement to safeguard your company’s assets and detect or deter theft and fraud. For instance, segregation of tasks is an integral component. If there are discrepancies in collections, these can easily be revealed. Documentation is another one that can help you detect fraud as it lets employers verify if sales receipts or bank deposit preparations were documented.

Once you’ve set up your internal control programs, monitor and revise them consistently. It’s also best to consult with professionals who have experience in this area to help you set up a fraud prevention program or internal control process in place.

Make employees aware there's a fraud prevention system in place

Your organization’s employees should be aware of the fraud prevention policies in place and the consequences associated with them. This type of awareness will affect all employees. Fraud employees who know that management is casting a watchful eye will hopefully be deterred by this. In turn, trustworthy employees who are not tempted to steal or commit fraud will be made aware of possible signs of theft or fraud. These honest employees can be your assets in fraud prevention.

Live the corporate culture

Don’t forget that a positive work environment can also prevent employee theft and fraud. This means you should have a clear organizational structure, written procedures and policies, and fair employment practices.

A great fraud prevention system can also take shape in an open-door policy as it gives employees open lines of communication with management. Senior management, HR teams, and C-level executives should also lead by example and hold each employee accountable for their actions, regardless of their position within the organization.

Courtesy of Pexels

Conclusion: Stay on top of fraud prevention during the recruitment process and have a solid follow-through

Fraud prevention is the responsibility of everyone in an organization, but particularly those in leadership roles. To support the long-term success of your company with a competent and reliable workforce, your recruitment team should have permissible information to gather and use during the employment screening and hiring process. With a thorough and efficient recruitment process that includes comprehensive applicant screening and integrity testing, you can help prevent employee theft and reduce overall workplace risk.

Identifying vulnerabilities and risks early, prior to onboarding an employee, helps protect the organization from risks related to financial security, legal non-compliance, and irreversible damage to corporate brand or reputation.

I’m In! What Do I Do Next?

Reach out to learn more about our pre-employment testing services today and take advantage of our introductory promo. You’ll get a full overview of the questions as well as a sample report. 

We can provide online or on-site training on how to administer the test and interpret the data given.

Scroll to Top