Corporate Anti-Fraud Plan

Corporate Anti-Fraud Plan

An anti-fraud plan is an essential pillar of a robust internal control system, as reducing the cost of fraud, estimated by the ACFE (Association of Certified Fraud Examiners) to be around 5% of organizations' gross sales, is a significant cost factor. It also has an impact on reputation and regulatory risk. Widespread fraud has caused well-established organizations to cease operations.

The central elements of an anti-fraud program are:

• The Code of Ethics or Conduct.
• The whistleblowing hotline.
• Monitoring systems.
• Investigation and sanctions for fraud.
• All these elements must combine and work harmoniously in the prevention, deterrence, and punishment of fraud, similar to how the two pedals of a bicycle interact.

The Code of Ethics or Conduct: Since it is impossible to sanction anyone if they have not been informed in advance of the expected behaviors, establishing a Code of Conduct is crucial to communicate the expected behaviors to everyone. In this regard, training is essential.

The Whistleblowing Hotline: According to ACFE statistics, almost half of fraud cases are uncovered through whistleblowing, doubling the effectiveness of internal and external audits. This is due to various factors, with the main one being that frauds such as bribery leave no trace in a company's documents or accounting records, and therefore, they require detection through other means. Shogun is highly effective as a whistleblowing hotline because it is entirely digitalized, providing confidentiality and comfort to whistleblowers and data mining capabilities to organizations.

Monitoring Systems: Regularly monitoring unusual transactions is an excellent action, especially when combined with an effective whistleblowing hotline. In fact, the ACFE indicates that while an organization with a robust whistleblowing hotline can reduce its fraud losses by 50%, combining this with monitoring can reduce losses by up to 75%.

Investigation and Sanctioning of Fraud: It is futile to become aware of fraud if this knowledge does not lead to corrective actions. These actions must be based on evidence that has been properly collected and verified, and it must be presented to the authorities when necessary to ensure appropriate punitive action, not only internally but also in the legal context.

Author: Guillermo Casal
International consultant and trainer in fraud prevention and investigation and anti-money laundering. He is a Certified Public Accountant, holds a Master's degree in Economics and Administration, and has six international certifications, including the CFE (Certified Fraud Examiner), CIA (Certified Internal Auditor), and CISA (Certified Information Systems Auditor).