Combating Employee Fraud: The Power of Hotlines and Review Systems
By Ashley Mazerolle, Marketing −
Hotlines and reviews curb employee fraud, save organizations millions.
Employee fraud poses a significant threat to organizations across the globe, draining an estimated $3.7 trillion annually from businesses, nonprofits, government offices, and more. However, a study conducted by the Association of Certified Fraud Examiners (ACFE) in 2014 has shed light on effective strategies for curbing this costly problem. The study reveals that employee fraud hotlines play a pivotal role in reducing fraudulent activities carried out by employees.
The ACFE study indicates that 42 percent of fraud cases investigated between 2012 and 2013 originated from allegations reported by fellow employees. This proactive approach serves as a powerful weapon against fraud, as it allows for the early detection of fraudulent activities. In contrast, only 16 percent of cases were uncovered through management reviews, with 3 percent being identified during external audits, and a mere 1 percent through IT controls.
Notably, the study demonstrates that allegations made by employees are most effective in exposing fraud that has persisted for an average of eighteen months, with losses averaging $149,000. While around 50 percent of U.S. employers have implemented employee fraud hotlines, only a small portion incentivize their employees to use the system. This oversight suggests that many organizations are missing out on a valuable tool for fraud prevention.
Yet, while hotlines are valuable, the study highlights the potency of effective review systems in combating employee fraud. Active monitoring through review systems enables early detection of fraud, reducing average losses to $49,000 from schemes that have been in operation for about nine months. In the absence of such systems, fraud often remains undetected for an average of thirty-two months, with average losses soaring to $325,000.
The success of an employee fraud hotline heavily depends on a thorough follow-up process for each allegation. Neglecting this step can lead to dire consequences, as evidenced by the Wal-Mart case in 2012. The company ignored bribery allegations during its expansion in Mexico, resulting in a costly investigation that impacted both Mexican and U.S. authorities.
In the modern fight against corruption, emerging technologies like EyeDetect™ offer promising solutions. This non-intrusive lie detection test analyzes eye movements instead of biological signals, making it an efficient tool for corruption investigators. By combining employee hotlines, effective review systems, and innovative technologies, organizations can bolster their defenses against employee fraud, leading to faster detection, lower financial losses, and enhanced compliance investigations.
Photo By: Lum3n
