Fraud prevention can include access restrictions, checks and balances and daily financial documentation. However, these aren’t the only controls that can protect your company’s finances.
Emphasizing ethics to prevent fraud will change your entire anti-fraud program. By incorporating ethical behavior into all of your policies and procedures, the entire company culture will change for the better, reducing the odds that employees will commit fraud or other misconduct. Follow these tips from some of the World’s Most Ethical Companies to start protecting your organization.
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Without strong policies and role models to guide them, employees are more likely to make ethically questionable decisions (including stealing from you). Download our free checklist to learn eight steps you can take to establish an ethical company culture and, in turn, prevent internal fraud.Get the Checklist
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Preventing internal fraud starts with hiring trustworthy employees. During the hiring process, run extensive background checks and interview references to find history of unethical behavior.
Jonnie Massey, Sr. Director, Special Investigations Services, Blue Shield of California suggests running “background checks for all employees and contractors. It’s important to know who is hired and to stay engaged with employees after they have been hired.”
Whether the employee will be working for you for a month or the foreseeable future, put the same amount of effort into their background check. Every employee must meet your company’s ethical standards if you want to protect yourself from fraud, theft and other incidents.
Another way to use ethics to prevent fraud in your organization is to raise awareness of fraud, waste and abuse (FWA) internally.
Massey suggests conducting “ongoing training and awareness of fraud. . . This can be accomplished through required training both in-person and online.” During the COVID-19 pandemic (or if you have permanent remote employees), you’ll need to conduct virtual training sessions. Find ways to incorporate the same messages and exercises from in-person sessions into online training.
In your training and other internal communications, explain “how to report [fraud] and the consequences of committing FWA” in your organization, Massey says. Emphasize the importance of reporting suspected fraud and remind employees of your promise to avoid retaliation against whistleblowers.
“Identifying and mitigating the risk to fraud, waste or abuse is an all play. This means that all employees of the organization have a duty and responsibility to live the corporate culture,” says Massey. “All employees are held accountable for their actions, regardless of their position.”
In other words, ethics and fraud prevention aren’t just one department’s or one person’s job. Explain that, as part of their employment at your company, employees must meet your behavioral guidelines and speak up when they see someone going against your ethical standards. At the World’s Most Ethical Companies, ethics is part of every employees’ tasks, every day.
When employees witness or suspect a coworker of unethical behavior, they might not feel comfortable reporting it to their manager. Employees are an invaluable resource for preventing fraud and incidents, so you need to give them more reporting options.
Waste Management, along with most of the World’s Most Ethical Companies, offers multiple avenues to serve every communication preference. A dedicated phone line and online form connect employees directly to the company’s Integrity Helpline. Employees can also contact the compliance and ethics department via phone, email or regular mail with complaints.
Be sure to include at least one anonymous reporting option. Even if you promise confidentiality and no retaliation, some might want to share information without identifying themselves.
Most industries collect and use client or customer data every day. Whether you just store this information or use it for artificial intelligence, machine learning or data analysis, it’s more important than ever to protect the data you possess.
Data theft and misuse can lead to a huge disaster of regulatory fines, reputation damage and lost business. That’s why Salesforce has established an Office of Ethical and Humane Use of Technology in their organization. At the very least, write a policy or section of a policy with guidelines on how employees can ethically use technology specific to your industry.
If you aren’t familiar, the five W’s stand for “who, what, where, when and why.” Add “how” and you should be able to clearly communicate to employees everything they need to know about detecting and preventing fraud and behaving ethically at work.
The Kellogg’s Company divides their Global Code of Ethics into five “who” sections (Our People, Our Consumers, Our Marketplace, Our Investors and Our Communities), then includes “How We Do What’s Right”, “Why It Matters” and “What It Means” in each one.
In your company’s Code of Ethics, include:
- Who the policy covers and what their responsibilities are
- What is and is not acceptable behavior
- Where the policy applies (not just the office but also home offices, conferences, etc.)
- When to ask for a manager’s help or advice
- Why ethical behavior is important and how fraud can harm the company and employees
- How to report witnessed and suspected lapses
Designing effective anti-fraud training can be tough, especially if your employees are split between the office and their homes, or in different geographical locations. How do you cater to different learning styles and keep employees engaged with the training?
The Kao Group uses a Business Conduct Guidelines Casebook. This document includes scenarios an employee might face at work, asks a question about how to handle the situation and explains the correct answer. For instance:
“New products have arrived at the port. However, the customs office is notoriously slow in clearing products, so I am concerned that the products would not be cleared in time for the new product launch events. Therefore, I contacted the customs authorities and the person in charge said, ‘If you give me a small tip, I can clear your products now.’ My manager ordered me to make sure that we have products for the launch events. Is it acceptable to pay a small amount to accelerate the procedure?”
They then give a short explanation as to why this is unethical, as well as specific considerations from the company’s policies.
Teaching through scenarios clarifies how employees should use your company’s rules in practice. Because they’re more interesting to read than a list of do’s and don’ts, example scenarios could increase employees’ understanding and retention of the training.
When focusing on ethics for fraud prevention, you can’t ignore corruption and bribery. Even the most senior employee can be confused or uncertain about what constitutes corruption, so be sure to set clear guidelines about what’s acceptable in your organization.
Honeywell’s ethics program includes an anti-corruption policy with information regarding gifts, conflicts of interest, recruitment, charitable contributions and sponsorships and more. It includes clear definitions, real-world examples and information on how to handle relevant workplace situations.
You’ll never regret writing thorough, straightforward internal policies, especially when they involve fraud or ethics. The more information they’re armed with, the less likely employees will be to make the wrong choice in the heat of the moment.
Employees aren’t the only ones who could defraud your company or make an unethical decision that sullies your name. You need to hold your suppliers and vendors to the same ethical standards.
Just like in your employee code of conduct, center your messaging to suppliers around your core values, like the Oshkosh Corporation does in their document. They also include guidelines on compliance, work environment, sustainability and data security that their suppliers must meet.
Working with unethical third parties puts you at risk for reputation damage by association, data breaches and financial losses. Make it simple: if vendors can’t agree to abide by your supplier code of conduct, you won’t start a relationship with them.
A formal code of ethics guides employee behavior and shows them that you take fraud and other ethical lapses seriously. Download our free template to start writing yours.
Using ethics to prevent fraud integrates your messaging into every aspect of the company. Follow the lead of these ethical companies: when ethics are part of day-to-day procedures, employees and your organization as a whole will thrive.
For department-specific fraud prevention tips, check out these resources:
- Cheat Sheet
- Cheat Sheet