Employee fraud awareness training is a vital part of any fraud detection and prevention plan. According to an ACFE report, 43% of fraud cases in 2020 were identified by a tip-off, and a majority of those tip-offs came from company employees.
All employees, and especially those in high-risk departments like finance, are a vital resource in fraud detection. However, employers cannot take advantage of this resource without providing adequate training. A comprehensive fraud awareness program can train all employees to become fraud detectors themselves and indicates that a company is serious about fraud at the same time.
Why is fraud awareness training so important?
Employers may be on high-alert when it comes to fraud risks, but employees are often less likely to consider fraud a possibility. Employees are closer to their colleagues than management and form part of a team, fostering workplace trust. Employees are less likely to suspect their teammates of fraud or consider them a perpetrator. Once fraud becomes public, the response from staff is often one of shock – ‘I can’t believe they would do something like that’.
While they may not consider it as often, employees are in an ideal position to spot potential cases of fraud. However, fraud awareness training is often limited to the leadership of a company, despite the fact that employees that work together consistently are far more likely to recognise suspicious behaviour than those in leadership positions. By giving employees fraud awareness training, they will understand the prevalence of fraud, the negative costs of fraud to the company and themselves, and have the tools to detect and report it, thereby reducing the costs to the company.
This training serves another purpose in fraud prevention – showing that company management is serious about fraud and committed to preventing it. Studies show that fraud awareness training lowers the risk of fraud in a company as it gives the impression that the company is serious about fraud and adept at spotting fraudulent activity. By proving training to all employees, potential fraudsters will recognize the higher likelihood of getting caught and will be less likely to take chances.
The components of successful employee fraud awareness training
Explain the motivations
To establish a picture of the high prevalence of fraud, start by explaining why people commit fraud in the first place. Fraud risk professionals understand that a small change in circumstances or behaviour turn a seemingly perfect employee into a fraudster – employees should understand this too. When they understand the motivations, employees will be more aware of the possibility of fraud occurring and cognisant of the changes in employee behaviour that could increase the chances of fraud occurring.
The concept of The Fraud Triangle is an essential tool in explaining the motivations behind fraud. The triangle is made up of three components – opportunity, pressure, and rationalization. Any employee may be compelled to commit fraud if they see an opportunity (lack of controls or accountability), can rationalize it (they will pay it back, or the company can afford it), or feel pressure at work or in their personal lives (performance targets or debt). The Fraud Triangle is a simple tool to explain a broad range of fraud motivations in a manner that is easy to understand and remember.
Explain the profile
An explanation of the motivations should be accompanied by an explanation of the typical profile of a fraudster. Employees subconsciously picture a stereotypical criminal – shady, suspicious, and withdrawn. They do not see other employees fitting the profile, and don’t consider fraud a viable possibility. However, many fraudsters are first time offenders with no prior criminal record. In fact, in some cases, a perpetrator is the ‘ideal’ employee that always offers to help and goes above and beyond – the last person you would expect.
Describe the profile of a fraudster in terms relevant to your company and your region. Include statistics on their business profile (tenure, authority, department) and add a list of the most prevalent red flags fraudsters exhibit. By providing a comprehensive profile, employees will understand that it really could be anyone and that they should always be on the lookout, no matter their relationship with the employee in question.
Make it specific
Fraud awareness training that is comprehensive and compelling should be specific to your company. The world of fraud is broad, and some parts may not be as relevant to your employees as others. Instead of overwhelming them with information, use statistics and examples specific to your company. The employees then won’t have anything to interpret or infer from the training; they will have precise examples they can look out for and report.
While you can use fictional examples in this scenario, real examples from within the company will best drive your point home. Don’t include any details that will infringe on confidentiality, but provide a general outline of what occurred and what impact it had. Explain the type of fraud, the length of time, the amount of the loss, how it was identified, and the consequences the employee faced, whether that be termination or prosecution. Internal case studies will have a larger impact on an employee’s awareness of fraud and its potential risks than abstract examples.
Make it simple
When planning a fraud awareness training program, employers and fraud risk professionals should ensure the information is easy to understand. Using complex language or industry jargon complicates matters and removes employees from the reality of fraud within their company. By using relatable language and real-life examples, the employees receiving training will realize that fraud is a real risk in any company, not a distant possibility.
Explain the effects
After opening minds to the possibility of fraud, highlight the negative impacts it has to convey the gravity of the problem. Some may think the loss is only monetary, or that fraudsters are the only ones who face consequences. But, the negative effects of fraud reach far beyond the isolated case. Explain the impacts of fraud on company controls, morale, and reputation, as well as the potential financial and legal challenges, to convey the serious impacts fraud can have.
External examples of major job losses or company closure as a result of fraud can also illustrate how damaging fraud can be if not reported and dealt with as soon as possible. When the issue is presented as relevant to all employees of a company, they will be more likely to consider it a serious concern and implement the steps recommended to prevent and report anything they see.
In 2020, the ACFE found fraud awareness training reduced median company losses by 38%. By providing every employee with fraud awareness training, you increase your fraud detection potential across all departments and decrease the likelihood that employees will commit fraud at all. With training that is comprehensive, specific, and easy to understand, you can transform every employee into a fraud detector.