According to a 2020 survey from PriceWaterhouseCoopers, 47% of respondents had experienced fraud in the prior 24 months. Business fraud is a growing problem as criminals become smarter and more daring. While no business is ever 100% fraud-proof, you can build your defenses. Here are six steps your business can take to better protect itself from fraud.
Educate Your Employees
Many instances of business fraud happen when criminals take advantage of unsuspecting employees. One example is when they use phishing emails to obtain passwords and account information. Companies need to educate and train employees to be vigilant about fraud. You should teach your employees how to create secure passwords and safely store them.
In addition, employees should be alerted about new types of fraud for which they should be on the lookout. One way to do this is to regularly send your employees the latest guidance from the Federal Trade Commission about recent scams. Additionally, you should have regular training sessions so that employees always know how to handle sensitive and confidential company information. This training should be accompanied by clear corporate policies that put best practices into action. All it takes is one mistake by an employee to put your entire business at risk.
Businesses can purchase insurance that will cover business fraud. There are several insurance policies that companies should consider. First, there is coverage for criminal acts of employees and others who steal from the business. This insurance can cover events such as:
- Computer fraud
- Fraudulent and unauthorized transactions
In addition, businesses should make sure they have coverage against identity theft. This may require a separate policy if it is not covered by the business fraud insurance. Given the sophistication with which criminals operate these days, you should carefully check all of your coverage to ensure that as many contingencies as possible are covered.
Scrutinize Potential Employees
Oftentimes, fraud happens from the inside. Employees can embezzle from a company or share sensitive information with others. Before hiring an employee, you should perform a background check to look for any instances of dishonesty or evidence that the employee can be a fraud risk. If the employee has responsibility for accounts or funds, this should be a more rigorous check. References and work history can only tell you so much about an employee. Background checks are an inexpensive way to prevent what could be a major problem in the future and could weed out potentially dishonest employees. In Texas, there are few legal limits on how an employer can use criminal history in employment decisions. Companies cannot be sued for discrimination if they do not offer a job to a candidate due to a criminal conviction. If a prospective employee has a criminal conviction in an area related to their employment, you should think twice about hiring them.
Invest in Cybersecurity
Hackers are becoming much more sophisticated, and they can penetrate many computer systems with ease. They can steal account data, customer information, and passwords. Companies have endured significant losses in data breaches, both through fines and lawsuits. Cybersecurity requires investment, both to find the necessary help and to build up your systems to make it much more difficult for hackers to access your data.
Cybersecurity also starts with training your employees. All it takes is one careless and easy-to-guess password to put your systems at risk. Your business should have employee password rules to ensure their passwords are difficult to decipher. In addition, you should have automatic file backups in case your computer system is shut down in a ransomware attack.
Tighten Your Entry Protocols
Fraudsters often do damage when they gain physical entry to a place of business. There could be records or passwords lying around that they are able to steal. Your business could likely benefit from tighter front-door entry protocols, such as a secure entry system and procedures that require visitors to sign in upon entry.
In addition, your business should also have policies that require employees to keep certain documents and records out of view and under lock and key. Your protocols should include mandating that some records should never be left out in the open.
In general, your business should try to reduce the amount of paper it uses for records. Having copies of documents floating around increases the risk that information will fall into the wrong hands. This includes paper checks and account records. Even though computer systems are at risk of being hacked, they are far safer than paper. Try to automate as much of your work processes as possible. Automation provides additional safeguards and ways to spot when something is wrong.
Build Your Audit Function
An internal audit helps keep track of what is happening in your business. Your company should conduct regular audits to test key functions. In addition, you should consider surprise checkups on certain critical areas of your business that could suffer the most from fraud. Work with experienced accountants and auditors to develop procedures for the best possible audit trail. Regular internal audits can catch fraudulent conduct shortly after it happens, in some cases even before it can damage your business. Make sure to vigorously test every possible vulnerable aspect of your business. It is far better to spend money on auditing than to lose even more as a result of preventable fraud.
To schedule a consultation, contact us today. The fraud attorneys at Feldman & Feldman can work for you to protect your best interests.
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