Incidents of fraud are on the rise in SA, with statistics by the SA Fraud Prevention Service indicating that new fraud listings rose by 56% in 2017. File Photo: IOL
Incidents of fraud are on the rise in SA, with statistics by the SA Fraud Prevention Service indicating that new fraud listings rose by 56% in 2017. File Photo: IOL

Companies warned to re-evaluate anti-fraud controls

By Supplied Time of article published Dec 4, 2018

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JOHANNESBURG – Incidents of fraud are on the rise in South Africa, with statistics by the South African Fraud Prevention Service indicating that new fraud listings had increased by 56 percent in 2017. 

In light of International Anti-Corruption Day, which falls on December 9, 2018, all businesses should take some time to ensure that they have robust anti-fraud mechanisms and controls in place.

This is according to Keeran Madhav, Director of Forensics at Mazars, who points to a 2018 global study on occupational fraud and abuse, released by the Association of Certified Fraud Examiners (ACFE), which found that nearly half of all fraud incidents were made possible by weaknesses in the internal controls of the businesses being targeted.

Madhav said one of the main reasons why a company’s anti-fraud controls may be weak, is because the controls are not proactive or robust enough. 

“Being proactive means that the company puts measures in place that detect fraud before any visible warning signs present themselves. This includes conducting surprise audits, and instituting a fraud hotline, conducting fraud risk assessments and proactive data monitoring, for example. The median loss of company’s who implemented anti-fraud controls were on average 12 to 56 percentage lower.

“In terms of robustness, a company’s fraud controls need to be able to evolve and adapt as the nature of fraud in the industry changes. To ensure that anti-fraud measures are indeed robust enough, it is vital to re-evaluate anti-fraud controls and programmes on a regular basis to see which aspects need to be updated,” he said.

Clear code of conduct

Madhav said some of the most important controls that needed to be present in every organisation included a clear code of conduct, robust anti-fraud policies, and proactive data monitoring. “There also needs to be a clear message or tone from the top levels within the organisation regarding the company’s ethics and attitudes towards any type of occupational fraud and dishonest dealings.”

In addition to this, he notes that ACFE’s report has shown that of all the anti-fraud measures, fraud hotlines that allow employees to report irregularities anonymously, have shown some of the best results. 

“The report shows that 42 percent of all cases were first brought to light as a result of telephone hotlines. This is the highest of all the channels, including email and online platforms. Fraud losses were also 50 percent smaller for organisations with fraud hotlines than those without,” said Madhav.

Lastly, Madhav said employee behaviour was also an important indicator of possible fraud, which was why business owners and senior managers needed to be alert for possible red flags in employees. 

According to the report, corruption was the most common fraud scheme in every global region with 70 percent of the cases perpetrated by someone in a position of authority and with a usually close association with a vendor or customer.

He says that, especially with management level employees, it is important to go the extra mile to see whether they have any relationships with clients and other stakeholders beyond the scope of their work.

Content supplied by Mazars.


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