Some of the worst forms of business fraud cannot only lead to a business paying heavy fines but may also lead to jail time and to the business being completely dissolved. In some cases, businesses do not even realize that they are perpetuating fraud and are surprised when they receive a call from a regulatory agency. Fortunately, there are many steps that a business can take to avoid fraud in the workplace.
Perform Background Checks and Ask for References
The first step in avoiding fraud is to be careful with whom is brought into the company in the first place. Businesses must take the time to perform a background check and obtain references from former employers to verify that a job candidate is trustworthy.
It is true that many fraudsters have not been arrested for fraud and will not have a criminal conviction in their background checks. However, this valuable part of the job process will still deter many fraudsters from applying to the company.
When performing background screenings, it is important to remember to verify references. There are many fraudsters who will provide bogus references and will hope that the references are not checked. There are cases when fraudsters use references that either do not exist, are dead or would never recommend the fraudster.
Education is the Only Way
Business owners themselves may need to take steps necessary to avoid committing financial fraud. It is possible to carry out financial fraud accidentally. The only way to avoid this is through proper education and by locating a legal professional that can provide financial fraud prevention resources. Business owners should be willing to allow someone to look over their shoulders to verify that the business is in compliance with all financial regulations.
Have Cross-Departmental Audits
Fraud often does not survive when there are regular checks and balances put into place. Departments should perform regular cross-departmental audits to verify that there is no fraud occurring. For example, the department that is responsible for inventory could easily sell merchandise and take the merchandise off the books. Regular cross-departmental audits can identify these forms of fraud.
Make Whistle-Blowing Anonymous
Many employees are aware of fraud occurring within a business but refuse to blow the whistle out of fear of retaliation. For this reason, the business must make it possible for employees to blow the whistle anonymously. Fortunately, there are third-party intermediaries that can help with this process.
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