By: Jo-Anne Barkley, Collection Supervisor
If you’re a business owner, the threat of fraud is very real.
According to Statistics Canada, nearly half of all retail and insurance businesses and around 84 per cent of financial institutions were victim to fraud in some capacity during 2008. And it’s not that businesses are careless. Fraudsters are savvy. They take advantage of new technology and consistently stay ahead of preventative tactics. If your business’s fraud prevention measures are an immune system then fraudsters are the common cold, constantly adapting to get you sick, except in this case, steal your money.
Different businesses will face different types of fraud. A retail business may encounter one of its employees stealing inventory while a financial institution may unknowingly facilitate identity theft. The safe bet is to assess your business and think like a fraudster. Ask yourself: which processes could fraudsters exploit to steal money? And what measures can I put in place that will prevent it from happening?
To get you started, we scoured top business sites and drew on our own experience to compile the best eight tips that will protect your business from fraud.
8 tips to protect your business from fraud
1. Hiring best practices and background checks
Complete thorough background checks on your prospective hires. Verify their past education credentials and employment history. Make a criminal check mandatory if necessary, depending on your industry. Think of your business like your home and your employees like roommates. The more you know about them, the better.
2. Inventory handling and tracking
Sometimes bad hires slip through the cracks during the interview process. If you’re in retail, keep a record of your business’s inventory and it will help prevent employees from stealing your products before they hit shelves for purchase.
3. Fraud training
Train your employees to spot suspicious cheques, counterfeit currency or stolen credit cards. If an employee spots a suspicious transaction at point of sale, refuse the sale and contact police.
If your business operates in the financial industry, keep an eye out for inconsistent or suspicious looking information on submitted documents. This could be a sign of identity theft.
4. Review contracts
Always review your contractor and supplier contracts. Do online research and ensure that with whom you’re dealing is reputable and dependable. If possible, review your contract with a lawyer to ensure that it’s fair and reflects the agreed upon terms. After the contract is approved, make sure your suppliers and contractors deliver on what you paid for.
5. Critical data and corporate information
Every company has sensitive or propriety information it wants to keep confidential from competitors or outside sources. If your business doesn’t have a confidentiality agreement for its employees, you can find a template here. Make sure the document covers all your confidentiality needs, and when in doubt, contact a lawyer for legal guidance.
6. Install surveillance equipment
A customer or employee may fake injuries on your business’s property, take legal action, and claim financial damages. This is a long, drawn out process that’s avoidable if you install surveillance cameras at various locations on your business's property and use the video footage as evidence.
7. Internet, email, laptops, cell phones, and storage devices
Malicious websites or emails may contain viruses that will steal your business’s information and your money. Introduce an online policy that protects your information from online fraudsters. Block harmful websites from your server and install an anti-virus program with a firewall. If possible, hire an information technology professional who can create an online protection policy.
8. Internal and External Audits
Audits are more of a fraud detection measure than a preventative tool but they’re still valuable. Regular internal audits of your business’s operations, inventory and accounting will help deter employee fraud. External audits provide unbiased perspectives that will help identify weaknesses in your business processes that fraudsters may exploit.
Commit to fraud prevention
It might not be possible to adopt all the above fraud fighting tactics, but what’s important is that you have a fraud prevention strategy in the first place. Provide as much training and as many tools to your employees as possible so they can prevent fraud. Be diligent, encourage them to follow the correct business processes and audit often.
If your business has already been victim to fraud, investigate so that you’ll learn from what happened. The investigation may explain how to enhance policies and prevent fraud in the future.