Modern times breed modern challenges and with the advent of the internet, the world has witnessed a constant surge in fraud. From your nearby store to Wall Street in the US, fraudsters lurk with the intent to create sophisticated schemes to steal and cheat from other people. The nature of fraud might have changed, but the goal has always been the same; stealing and cheating. Hence, a proper fraud detection strategy is the need of the hour. It doesn’t matter if you are running a small departmental store or a hedge fund, you must equip yourself with adequate knowledge that allows you to protect your business.
Here are some key strategies that businesses can adopt to protect themselves from fraud;
1. Anomaly Detection
Experts suggest analyzing transactional data to figure out unusual patterns that deviate from the usual customer behavior. A bank, for instance, might flag a specific transaction if the consumer makes a considerably large purchase from a location that is far from his usual spending habits. Moreover, if you are running an e-commerce platform, using machine learning software can allow you to detect a sudden increase in orders from the same IP address, indicating that there was fraudulent activity.
2. Analyzing the Scale of Fraudulent Activities
Identifying fraud risks is an integral part of devising a strategy that allows you to take preemptive measures. Once you have identified, assessing the probability of that fraud taking place is integral. Organizations can utilize certain parameters to assess such as; previous incidents that might have taken place in your organization or in another that is in the same industry. Moreover, the frequency of fraud taking place in your said industry can give you an idea of what measures you need to take. Once the assessment takes place, it will diminish the fraud risks.
3. Whistleblowing
Whistleblower hotline is an effective tool for online fraud detection. The great thing about whistleblowers is that they can be anyone within an organization. The hotline provides anonymity and a safe way to report any fraud they might come across in their daily work. Often people are scared to lose their jobs or face other consequences. A hotline removes that fear encouraging anyone to report suspicious activity.
4. Database
Business owners can keep track of past cheating by establishing a database vis-a-vis a robust fraud detection system. This file could be used to add details about what has happened and how the investigation was conducted. Moreover, by reviewing the database periodically, owners can understand why cheating happens and how to prevent fraud. Putting new rules in the workplace can stop fraudulent activity from happening again.
5. Training
Management must train their employees so that they can identify and stop fraudulent activities at workplaces. However, every training must be personalized for the specific tasks of the company. And it should be easy to understand. Every employee should partake in the training and be encouraged to seek out a fraud detection solution in their area. Compensation in monetary terms is a great incentive to motivate people.
6. Investigations
Law enforcement agencies can initiate investigations to detect fraud. If any laws are broken, such agencies can collect evidence and then testify in court. Many agencies are working at the state and federal levels. For a business owner, either of the parties can partake and create a full-fledged fraud investigation, depending upon the scale of the operation. Moreover, there have been many cases where the police and law enforcement agency have combined their resources to counter large-scale fraudulent activities.
7. Audits
Audits are often conducted by independent organizations. This allows an unbiased investigation against any fraudulent activity taking place. There are two forms of auditory functions; internal and external. Internal audit reviews evidence from within the firm and investigates the employees or fraudsters. AI fraud detection tools can also be used in this scenario. However, external auditors are given limited access. Their responsibility pertains to only reviewing the financial statements of the firm. This allows them to check financial information (balances and amounts) to catch any intentional fraud during auditing.
8 Tip-offs
Organizations need to create a system with an element of tip-off. It will ensure that any mischievous activity is reported, in a confidential way, to the department leading fraud investigations. On the other hand, external tip-off is also an effective methodology to attain an outside perspective. This offers an opportunity to communicate with stakeholders that are willing to report fraudulent activities taking place.
Conclusion
Conclusively, one can proclaim that strategies for fraud detection need to be part of the company manifesto. Implementing a robust mechanism that allows organizations to detect and prevent fraud is crucial for complying with regulations. Moreover, it helps to maintain a good reputation in the industry and create a secure working environment. Every organization has to deal with fraud in one way or another. Turning a blind eye to this might hamper an organization’s success in the future and most importantly lead to a complete shutdown of your business.
