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Fraud Prevention: An Essential Function During The Pandemic – Criminal Law | #riskmanagement | #security | #ceo | #ceo | #business | #cybersecurity | #informationsecurity



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The fraud triangle is a well-known tool in understanding fraud.
The three sides – opportunity, incentive, and rationalization
– offer an explanation to a person’s decision to commit
fraud. Similarly, they offer guides to preventing fraud: by
addressing the three sides of the triangle, an organization can
reduce its risk of fraud.

In a financial crisis, such as we are seeing during the COVID-19
pandemic, all three sides of the fraud triangle indicate an
organization is at heightened risk of fraud. Individuals and
companies facing serious financial pressure have incentive to
commit fraud. Where there are staff reductions, employees working
from home, or management focused on critical functions only, unique
opportunities arise for committing fraud. Finally, the extreme
stress of the pandemic offers ample rationalizations. It is the
perfect storm for fraud. As such, companies need to pay more
attention than ever to appropriate controls and procedures to
prevent and detect instances of fraud.

An organization should consider the following as part of its
fraud prevention controls:

  • Assess your internal control environment: have recent personnel
    changes compromised your control functions, such as segregation of
    duties or dual authorization? Take steps to ensure the control
    environment has not been inadvertently damaged by recent
    changes.
  • Take care with contractors and third parties. Ensure proper
    controls are in place to verify invoices and obtain the proper
    back-up documentation.
  • Work with your IT team to be on high alert for cyber-attacks,
    such as phishing schemes. 
  • Establish a strong tone from management that fraud prevention
    is key area of concern. Reinforce to all employees, particularly
    those in positions sensitive to fraud, that all prior policies and
    procedures still apply. The unique circumstances do not justify
    cutting corners or skipping important steps. To the contrary, these
    challenging times require your employees to be alert to
    fraud. 
  • Ensure your human resources team is checking in on team
    members. Your HR team should be well informed of the “red
    flags” of fraud in employees, and should immediately report
    any suspicions. Those suspicions should be promptly reviewed and
    investigated.
  • Ensure your employees, contractors, and third parties are aware
    of your whistleblower line and that this line stays fully
    operational throughout this crisis. Whistleblowers are the main
    source of detection of fraud.

Fraud risk management is an important business function in these
uncertain times. Companies that fail to enforce strong controls
will face the consequences in the months and years to come.


About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the
world’s preeminent corporations and financial institutions with
a full business law service. We have 3800 lawyers and other legal
staff based in more than 50 cities across Europe, the United
States, Canada, Latin America, Asia, Australia, Africa, the Middle
East and Central Asia.

Recognized for our industry focus, we are strong across all the
key industry sectors: financial institutions; energy;
infrastructure, mining and commodities; transport; technology and
innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global
business principles of quality, unity and integrity. We aim to
provide the highest possible standard of legal service in each of
our offices and to maintain that level of quality at every point of
contact.

For more information about Norton Rose Fulbright, see
nortonrosefulbright.com/legal-notices.

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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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