Managing Internal Fraud During COVID-19

As if businesses don’t have enough to contend with now, as we’re still grappling with the COVID-19 pandemic several months in, there’s a potential issue looming on the horizon that’s not getting a lot of attention—the potential for employee fraud to increase.

Businesses’ workforces are dispersed, and it’s much less common for everyone to work in the same location.

Remote work isn’t new, of course, but on the current scale, it is new in many ways.

Businesses have wonderful tools and resources at their disposal to reduce some of the risks of employee fraud, even in a workforce working remotely.

One example is AP automation. AP departments that before this relied on manual invoice delivery and matching processes are shifting toward cloud-based invoice matching with automatic approvals.

Having these cloud-based tools with centralized visibility does cut down on the potential for fraud, but there’s still more to it than that for employers.

The following are some of the things to know and ways to combat potential internal fraud during COVID-19 and beyond.

Understand the Changes

For the first few weeks or even months of the pandemic in the U.S., many people and businesses were in a state of shock. They were trying to scramble to move to a remote infrastructure.

Now that everyone is more in the swing of things and comfortable with changes, it’s important to start looking at operational changes that have occurred and could leave your business open to internal fraud.

Those elements of control that come with having employees working in the same physical location are gone for many businesses and may not come back.

The risks, including fraud risks, may be here to stay, so it’s something that has to be considered.

A lot of these changes are going to require a procedural response.

Businesses are going to have to start writing new policies, training employees, and perhaps putting new controls in place.

Know the Risks

Along with having a general understanding that more remote work and other coronavirus-era changes are upping the potential for workplace fraud, start learning the specific threats. Prioritize which are likely to be most relevant in your business.

  • Data theft: When your employees work remotely, they have access to large amounts of data from anywhere they’re working at the time. Along with that increased access, there’s a sense of no supervision or oversight in many cases. This can be especially problematic with employees working with health care or financial data. Of course, it’s not just the employees to worry about. They could be hacked if they’re using a shared internet system or the theft could be done by someone they live with.
  • Time theft: You might not think of this as fraud, but it is, and it’s one of the biggest risks of remote work. Your remote employees may be largely working on the honor system. Time theft could mean an employee spending their days doing personal activities or logging into the system and watching a movie. Lower productivity due to time theft contributes to financial losses.
  • Payroll fraud: It can be tougher to identify payroll fraud when employees work remotely, and the specific types of fraud that might fall under this umbrella include timesheet fraud and paycheck theft.
  • Worker’s compensation fraud: When your employees are working remotely, there can be gray areas as far as what would be covered by workers’ compensation and what wouldn’t be.

Internal fraud doesn’t just have to occur because of employee actions.

Another risk is bringing on new suppliers or partners without fully vetting them.

You have to consider the fact too that we’re operating in crisis mode for the most part, so business models are changing rapidly. It’s leaving executives focused on operations and giving less attention to combatting fraud.

There are fewer resources available for anything considered non-essential, and that could include monitoring fraud.

It could be that your business has had to cut employees too, as you deal with cash flow issues, so those important people who would have otherwise been responsible for oversight may no longer be employed with the company.

Employees may be feeling more pressure than ever before because of financial problems created or worsened by coronavirus, or perhaps they’re feeling job uncertainty. That sense of fear or desperation can lead employees to do things they wouldn’t otherwise.

So what can businesses do?

Preventing Fraud When Employees Work Remotely

There are a few major, comprehensive things you can do to mitigate the risk of employee fraud.

First, you want to create working guidelines and procedures for remote employees. Now that we’ve all had a chance to adjust to the so-called new normal, you can start building that into your business in a more defined way.

Then, ensure you’re training employees on new measures.

You should also retain some of your anti-fraud staff if at all possible.

It can be tough to rationalize that when you’re dealing with a downturn, but you’re likely going to end up losing a lot more money if you cut these staff completely.

Then, there are smaller steps you can take, as well.

  • Make it a requirement that employees only work on secure networks and that they don’t use public WiFi.
  • When possible, issue company-owned devices to remote workers, rather than having them use their own devices.
  • Get your IT staff to manage any software updates remotely, instead of providing administrator credentials to employees.
  • Any employees who are going to work remotely should sign telecommuting expectations and guidelines.
  • Time theft should be integrated into your fraud policy, including specific definitions of what’s considered time theft and also what the consequences are.
  • If you have newer employees working for you, use monitoring software or tracking software throughout the day.
  • When employees are working remotely, reconcile payroll accounts and balance sheets more often.
  • Rotate financial tasks and restrict payroll record access as much as you can.
  • Have a manager sign off on all payroll records.

Internal fraud isn’t a given in a remote work environment, but there is an increased risk, so be prepared and proactive.

About Kushal Enugula

I’m a Digital marketing enthusiast with more than 6 years of experience in SEO. I’ve worked with various industries and helped them in achieving top ranking for their focused keywords. The proven results are through quality back-linking and on page factors.

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