Fraud Detection

Fraud detection should form part of an organisation’s overall anti-fraud strategy to identify and stop new or historical fraud at the earliest opportunity. Effective fraud detection saves money and protects businesses and their employees, shareholders and customers.


What is Fraud detection?

Fraud detection is the identification of actual or potential fraud within an organisation. It relies upon the implementation of appropriate systems and processes to spot the early warning signs of fraud.

Key elements of a robust fraud detection strategy include:
Ongoing risk assessments
Staff training and awareness
Fraud reporting mechanisms
Data-mining and analysis
Manual checks and balances
Systems, processes and control reviews

Even the most comprehensive fraud prevention controls can be circumvented by a determined and skilled fraudster. Fraud detection techniques can help to uncover new fraud in action as well as historical frauds.

The benefits of effective fraud detection:
· Saves money and protects businesses and their employees, shareholders and customers.
· Reduced exposure to fraudulent activity
· Identification of vulnerable employees at risk of fraud
· Reduced costs associated with fraud
· Refined organisational controls
· Improved financial and operational results
· Improved shareholder confidence and market position

The hallmarks of effective fraud detection:
1. Have a fraud detection strategy in place
2. Introduce a robust system of internal control for the detection of fraud
3. Establish a credible mechanism for staff to report suspicions of fraud
4. Ensure that your organisations exposure to fraud is considered when introducing new, or when amending existing systems and processes
5. Keep your risk register up-to-date
6. Implement systems and processes to detect the early warning signs of fraud.
7. Be alert to possible collusion between staff and third parties
8. Ensure regular evaluation and monitoring of fraud detection controls
9. Review your ant-fraud strategy on a regular, preferably annual basis
10. Take account of changes in business activities and/or control procedures that may open up new potential fraud risks.
11. Undertake pre-employment screening of prospective staff
12. Consider conduction ongoing periodic checks for staff in high risk areas
13. Ensure regular monitoring of compliance with fraud prevention and detection policies, processes and controls
14. Introduce a fraud response plan to deal with any frauds that come to light.

Things not to do
1. Adopt a generic control procedures and policies across the business where the risk of fraud varies by business area
2. Ignore ‘red flags’. Certain industries and/or activities are exposed to specific fraud risks
3. Rely on fraud to be detected by luck or good fortune
4. Sweep reports of fraud under the carpet

sourced from Fraudadvisorypanel.org