Article written by:
Mallory Ashbrook
Manager, Forensic & Dispute Advisory Services 

With tax season upon us, we are hearing all about tax fraud and how to protect our personal information in an effort to avoid being the victim of one of these scams. This is also a good time for a reminder on the basics of how to protect your business from fraud.

All of the recent news seems to be focused on artificial intelligence as a way to prevent and detect fraud.  While artificial intelligence is certainly a cost-effective and efficient way to prevent and detect fraud, it is important to remember that your employees are still one of the most effective fraud detection methods. According to the Association of Certified Fraud Examiners 2018 Report to the Nations, tips are still by far the most common initial detection method with 40% of cases detected through a tip.

The most common warning signs that someone is committing fraud are related to an individual’s personal habits.  For example,  the signs could be an individual living beyond their means, has an unusually close relationship with a customer or a vendor, never takes vacation time, or has financial difficultly.  While artificial intelligence can certainly help to detect a pattern or issue the data, it cannot replace the uniquely human aspect of fraud.

This is likely why tips are still the most common initial detection method and why companies with fraud hotlines also have the following other benefits.

  • Fraud losses were 50% smaller at organizations with hotlines than those without
  • Employees provide over half of the tips
  • Organizations with fraud hotlines detect fraud by tips more often than those without, with 46% of cases detected by a tip for companies with a fraud hotline compared to only 30% of cases detected by a tip for companies without a fraud hotline

In addition to those benefits, fraud hotlines can also help to reinforce corporate policies. Having a fraud hotline makes it clear that unethical conduct is unacceptable, and they can also help to set a tone of control from the top down.

Not only are fraud hotlines the most common way a fraud is detected, but they are also relatively easy to implement and require little to no upkeep from the company. With all of those benefits – what company would be caught without one?

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