An industry seminar on fraud risk, prevention and response, found 778 internal fraud cases in 2012 (more than two a day!). These scams included fake billing, corruption, and expense reimbursement.

Although the companies affected suffered minimal losses in more than half of these cases, their headaches came from private civil claims, potential government investigations, criminal prosecutions, and bad publicity.

Fraud can be uncovered by everything from employee tip-offs and management reviews to internal audits and even “gut” feelings by an experienced observer.

If you’ve been scammed from the inside, start with a prompt and thorough internal –investigation. Gather the facts, preserve evidence, assess legal repercussions, and take corrective action – before an outside authority does. (Being the first to report the incident to the government can take the sting out of an official probe).

To correct the situation you should: 1) make amends to the victims; 2) revamp corporate-compliance programs and 3) strengthen internal controls. Make sure that these actions are tangible and specific.

Consider offering substantial financial incentives to employees who might suspect that something fishy is going on, but may not want to get involved.

Lastly, , insurance can help protect your business from the loss of money, securities, and inventory resulting from employee dishonesty. For example, Fidelity and Crime coverage usually includes property theft, losses due to forgery, and electronic wire transfer fraud.

Your insurance program should include a cyber policy. A recent court decision expands coverage of cyber losses under fidelity bonds. Damian Brew, managing director of Marsh’s FINPRO practice warns, “Having insurance coverage without cyber insurance is like playing hockey without a goalie.”

Our business insurance professionals would be happy to review your internal fraud-control program. Just give us a call.

Need insurance for You, Your Family or Your Business?
We can match you to a qualified, local insurance expert!
Further Reading
Security cameras in the workplace can help employers stave off fraudulent Workers Compensation claims - as long as the companies using them are careful not to violate employees' privacy. CEC Entertainment Inc. (Irving, TX), which operates Chuck E....
Not every threat to your business comes from outside. A nationwide survey reported 778 internal-fraud cases in 2012, involving such scams as phony bills (three in four cases), corruption, and expense reimbursements. In more than half of these cas...
How secure are your business assets? According to the Association of Certified Fraud Examiners (ACFE), companies with less than 100 employees lose an average of $155,000 a year to fraud. Small businesses also have a higher fraud rate than larger f...
What 2016 New Year resolutions are your making for your company? Consider hiring an internal control consultant to help you reach your goals.  What is an Internal Control Consultant? As a company insider, you may not be objective abo...
Every small business faces financial risks. However, you can lower your risks and improve your chances of success when you become aware of several external and internal financial risk factors. External Risks Economic Risks Economic downturns...