Focus on Fraud

On a Friday afternoon late in 2013, a finance executive received a phone call from what he thought was his company’s bank. The person on the phone told the executive that there may have been some fraudulent activity on the account. The executive was somewhat hesitant, but finally agreed to provide the caller with the account and password information in order to cancel several suspicious payments.

When the executive logged on the following morning, he discovered that over $1.2 million was gone. The bank had no record of any conversations. Needless to say, the executive was fired and is now being sued for being negligent in his duties to safeguard the company’s assets.

This incident shows that even what we think are highly sophisticated security systems, can end up being very weak because of human error. People often think that they don’t have to worry about electronic security because a computer somewhere is handling this. Companies need to communicate with all employees the importance of being mindful of potential fraud at all times.

In May of this year, Zurich Insurance Group issued a warning that law firms were being targeted by fraudsters pretending to be bank personnel asking for access to accounts. This was often done on Friday afternoons, a time where people are ready to leave and are already thinking about the weekend and not potential fraud.

Any business can be a potential target for fraud. Technological safeguards to your computer system and electronic information are a must, but they are still susceptible to human error. Make sure to include business wide training on fraud prevention as part of your employee training process and you can help mitigate the risk of fraud in your business.

posted by Chris Hatcher, CPA/CFF, CFE, CVA, CGMA