Who is the Biggest Fraud Detector?

An organization’s front line of protection is not what you’d expect.

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When asked the question of how fraud is most often detected within an organization, most people would respond with “auditors” or “internal auditors.”  After all, such an important layer for any organization would seemingly be the folks that come and check to make sure controls are in place, working properly, etc. While internal audit does statistically detect approximately 15% of fraud within a company, it’s actually not the first, or best, line of defense…

The first line of defense against fraud is the company’s own employees.

Hotlines Reveal 40% of Company Fraud

Studies show that employees that have access to fraud hotlines reveal about 40% of fraud within a company.  For banks, the ability to report unusual activity is especially effective, as fraud hotlines provide employees with a way to anonymously report suspicious activity, management override, or any other fraud that may be occurring.

In addition to detection, fraud hotlines help to deter employees who plan to commit fraud.  Often knowing that employees are able to report suspicious activities, especially while remaining anonymous, has been proven to deter fraudulent activity.

Implementing a Fraud Hotline

Using a third-party provider to implement and administer a fraud hotline is typically inexpensive and can save an organization countless dollars when it comes to deterring, detecting, and mitigating internal fraud. Most times the fraudsters within a company are long-time and trusted employees. There’s no better way to identify this behavior than through the employees that see it happening, can report the concern anonymously, and catch it early.

Contact a K·Coe advisor to learn more about effective third-party fraud hotline services.

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