How To Detect And Stop Fraud

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PREAMBLES

• The greatest problem facing the banking industry globally right now is fraud.

• The banking trade loses billions of dollars yearly to fraudulent activities.

• A number of the frauds are executed efficiently by outsiders while a reasonable number is efficiently perpetuated with the connivance of an insider/staff.

• Anybody can perpetuate a fraud.

FALSE ASSUMPTION ABOUT FRAUD

Below are some false assumptions about fraud:

1. Most people is not going to commit fraud.

Response: A vast majority of people, underneath sure circumstances, will commit fraud particularly if they’re satisfied that it’s going to go undetected. Subsequently everybody should be assumed to have a tendency to commit fraud.

2. Fraud is just not material.

Response: Fraud may be very materials and it is capable of eroding the working capital of any organization which consequently outcomes to illiquidity and insolvency.

3. Most fraud goes undetected.

Response: Most frauds are detected over time especially if due process and procedure is followed.

4. Fraud could be well concealed and the auditor can’t detect it.

Response: There may be often a loop gap that can finally come to the open. With a sound inside control procedure, such fraud will ultimately be detected.

A well trained auditor can simply detect a fraud following properly designed audit program.

5. Those who are caught and prosecuted are usually not wise.

Response: The employees with fraudulent intentions think that those caught should not smart and the mindset of a first-time fraudster is either: I am just going to do it once or, I’m too smart to get caught.

COMMON TYPES OF FRAUD

Common types of fraud in banking embrace the following:

1. Cheque substitution

2. Cheque Suppression

3. Cheque cloning

4. Cheque kitting

5. Cheque alteration

6. Teeming and lading

7. Claiming unearned time beyond regulation allowance

8. Dry posting

9. Accumulating charges due from unauthorized and unofficial lengthy duration phone calls

10. Overstating claims for reimbursement

11. Deposit suppression

12. Adding fictitious names to the payroll

13. Overcharging prospects

14. Removing money directly from vault, until box, petty money etc

15. Obtaining funds for false invoices both self-prepared or obtained supplier or vendor (e.g. Hotel, air ticket and many others).

FACTORS CONTRIBUTING TO FRAUD

• Growing complexity within the construction of a corporation

• Rising speed of transaction dynamics

• Improved technological advancement which assist the benefit with which transactions are concluded

• History of inattention of supervisors

• Understaffing which could cause a breakdown of twin management

• Acceptance of some level of fraud as ‘value of doing business’.

• Outdated and ineffective control measures that do not meet acceptable international standard.

• Enhance in employees turnover which technically could lead to understaffing

• Aggressive accounting entries all in the bid to submit profit.

FRAUD SIGNS

The next are traits of a fraudulent staff which ought to put supervisors and associates on guard:

1. An employee who regularly borrows small quantities of money from different colleagues

2. An employee who asks to “hold” his or her personal cheque before negotiating it

3. A employees who incessantly closes late and does not go on vacation.

4. Low or inadequate wage levels workers

5. Employees who show resentment at not being handled fairly or being taken advantage of

6. Superiors who lack respect and appreciation for workers

7. Highly domineering senior management

8. Staff who look like dwelling, and spending above their means

9. Split purchases

10. Bid process irregularities

11. Identical bidders time and time again

12. Cost of invoices from a duplicate quite than an original

13. Unusual sequence of numbers on vendor invoices

EFFECTS OF FRAUD

Fraud has far reaching effect on the organization and the society at large.

• Fraud can deplete the working capital of any organization which will culminate in the end to distress.

• Disengagement of employees and the associated social hazards to the staff and his dependant.

• Loss of confidence of shoppers, suppliers, creditors, contractors and shareholders on the group and the industry.

FRAUD ALERT AND PREVENTION TIPS

1. Assume everyone can commit fraud under the best circumstances.

2. Use your data of inner control to “think dirty” and then check out your suspicions.

3. Do not forget that good documentation does not imply something occurred; only that someone said it happened.

4. Pay attention to paperwork themselves and the supporting paperwork, observing the consistency of numbers, dates amount.

5. Consider the reasonableness of account balances and accounting entries, especially adjustments

6. Develop relationships and take note of hints or rumors of wrongdoing. Follow up. Remember that persons are usually torn between their moral standards and their reluctance to get involved. They seldom inform all they know within the first interview.

7. Check out hunches; first impressions are often right.

8. Be inquisitive; don’t simply settle for explanations, especially in case you don’t understand them.

9. Use statistical sampling to force you to look at gadgets you would not usually in any other case examine

10. Look for patterns of surprising transactions. (When you’re stunned, it is unusual!)

CONCLUSION

As a result of rising chorus for prosperity, vast majority aren’t prepared to sweat it out there in making wealth. This has given rise to various sharp practises (fraud) leading to many being caught and jailed. Honesty, diligence, hard-work is the only path to enduring wealth with long-life. Do not involve in any sort of fraud!

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