5 Tactical Approaches For Fraud Prevention

Fraud Prevention - Complete Controller

Many organizations and individual businessmen face fraud each year due to their employees or business partners. New entrepreneur start-ups and small businesses are more vulnerable.  The risk of fraud has increased due to the advancement of technology and progressive development of the world into a global village.

The increased awareness of technological development and complex organizational structure requires the corporations to incorporate internal anti-fraud approaches to combat fraud. According to 2014 research reports by global nation, organizations face a 5 % loss due to fraud each year, in which internal employees committed 85 % of severe fraudulent cases. Organizations should develop multi-layered fraud prevention strategies while keeping these statistics in view. Download A Free Financial Toolkit

Eliminate all loopholes that facilitate employees by implementing these five fraud prevention strategies.

  1. Corporate culture

Corporate culture defines procedures and policies which govern employees. The organizational structure such as a reporting system, the accountable person, segregation of duties, job responsibilities, and limitations should be clearly defined.

Hire the right employee by investigating their past employment history and educational background. All employees should know the tactical approaches which exist in their organization to prevent fraud. A documented policy that defines fraud, its prevention and detection policies should be implemented after proper training of all employees.

Any leniency or flexibility in misconduct or suspicious activities should be avoided.  This ignorance will lead to violation of policies, indirectly encouraging employees to plan a fraud. The Zero tolerance policy of all kinds of fraud should be communicated to employees. They should also be aware of actions that would be taken in case of fraud. LasPass – Family or Org Password Vault

  1. Internal controls

Internal controls of systems and organizations define the plans to prevent the company and its assets from fraud and theft. This system should be revised frequently to analyze its effectiveness. It should be regularly updated according to the new needs, development, and advancements of a company. Internal controls should clearly define accountability and compliance.

Documentation is an integral part of an internal control system and the most crucial tactic for fraud prevention. All procedures and transactions should be documented to minimize fraud. Every expense should be approved and countersigned by a managerial level employee to ensure the validity of receipts and to ensure. Restrict all physical approaches to documents and information.

  1. An independent audit system

An independent audit team should be conducted for regular and surprise audits to check inventory and cash situations. Checking vacation balances should be mandatory.

Annual and the audit committee should monitor quarterly audits. This team should also validate the results of an internal audit. Audit teams detect 29% of fraud cases, a report says. This team is well aware of risk factors for fraud and policies to prevent fraud. These also monitor the policies to be strictly followed to avoid the more risky procedures. Cubicle to Cloud virtual business

  1. Effective reporting system to reduce fraud

An effective reporting system should be developed. All employees should know how and where to report any suspicious activity. An anonymous reporting system should report fraudulent cases because many employees are hesitant to disclose their identity while reporting others.

All employees should be aware of the fraud prevention and reporting systems, and honest ones are encouraged to report.  According to a report, 40% of fraud cases are detected by tips given by employees.

  1. Hire a professional fraud prevention expert

Certified fraud examiners could be hired as a part of a prevention program of fraud.  They play a vital role in generating and implementing fraud policies. They provide consultancy against internal and control audit systems and the detection of fraud.


Fraud in business can result in significant financial loss, a massive waste of time, and a ruined reputation. Implementation of multi-layered fraud risk strategies leads to a successful strategic business corporate organization.

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