Tune your fraud radar

Following on from my suggestion that entrepreneurs perform some spot checks on their financial processes, a report on fraud from KPMG has landed on my desk.

While the headline news was good – the number of serious fraud cases dropped from 56 to 50 during the first half of 2011 and the total misappropriated fell from $131 million to $90 million – the report still contained some very important tips on how to indentify fraud.

Firstly, remember the profile of the typical fraudster: male, aged between 36 and 45 years and generally in a part of the business like finance, where there is access to money. Gambling problems are also a tell-tale sign that something might be wrong.

But the biggest thing I took from the report is that it is not your lower-paid staff that you have to watch – it’s managers.

In the first half of the year, the average amount for management-led fraud was $3.37 million – more than twice the average fraud value for non-management employees at $1.51 million.

Managers of course, know how financial controls work – and how they can beat them.

This isn’t a call to go and start interrogating managers. But it is a reminder to keep fraud in the back recesses of your mind and have systems in place to spot it.

Get it done – today!