Maintain a fraud policy
Every organization should create and maintain a fraud policy for guiding employees. A corporate fraud policy should be separate and distinct from a corporate code of conduct or ethics policy. A model or sample fraud policy is available from the ACFE. Such a fraud policy should be clearly communicated to employees. Various avenues of communication include use in orientation of new hires, employee training seminars, and annual performance evaluations. Written acknowledgment by each employee that the policy has been read and understood should be required.
Establish a telephone hotline
A rather novel fraud approach that is becoming more common is the use of anonymous telephone hotlines (Holtfreter, 2004). It is a very cost effective means for detecting occupational fraud and abuse. A hotline allows employees to provide confidential, inside information without the fear of reprisal that accompanies being a whistleblower (Pergola and Sprung, 2005).
Hotlines may be supported in-house or provided by a third party. An example of a third-party hotline is a subscription service offered by the ACFE. The annual subscription rate may be quite modest. The results of all calls are provided to the client within two or three days. A hotline is not only an effective detection tool but it also enhances deterrence. Potential perpetrators will likely have second thoughts when considering the risks of being caught.
Employee reference checks
Organizations should conduct employee reference checks prior to employment. An employee with a history of perpetration of fraud schemes may move from one organization to another. When employee references are not checked, a dishonest person may be hired. A dishonest employee can defraud an unsuspecting organization of thousands of dollars and move on to a new job before the fraud is discovered. Resumes should be scrutinized and information verified to determine that the information provided is legitimate. An organization should not rely on the telephone numbers listed on the resume for prior employers, as they may be false. Employer phone numbers should be obtained by the organization independently.
Organizations should conduct a second reference check six months after an employee starts work. The reason for a dishonest employee’s recent dismissal from a previous job may not have had time to become part of the employee’s record during the initial search. This may be discovered by a second check.
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