Updated: Sep 3, 2021
You cannot legally steal from the company. This is something you must formally state. Seriously. If you do not explicitly inform your employees that theft is against your company policy BEFORE you experience fraud, your employee perpetrator might actually be found not guilty if you decide to prosecute.
Previously, I testified as an expert witness in a fraud case. We presented solid evidence and developed a strong case. It was a case in which every person in the courtroom understood that the prosecuted party would most likely be found guilty. Even the defendant knew she would probably be convicted. There really wasn’t much suspense as the jury headed to deliberations. But then they didn’t return immediately. They didn’t return nearly quickly enough for what was expected to be a swift verdict. Finally, they filed back into the courtroom.
Shock came out in gasps throughout the gallery as the jury foreman stated, “Not guilty.”
As the courtroom was cleared, I was able to speak with a member of the jury.
“How did you possibly reach a verdict of ‘not guilty’ in this case?” I asked, still confused.
“Mr. Dawson,” the juror replied, “the company never told her that it was wrong to steal.”
And there you have it. A company suffered loss, and no one was held accountable because the company never formally stated that its employees should not steal.
This is why we cannot stress enough the importance of a Fraud Policy for your business.
It is simple. It is quick. It is something that could help deter theft, and at the very least, give your business some protection should you experience fraud.
Your Fraud Policy*
A solid Fraud Policy does so much for your company and takes very little time to implement.
Your policy should outline the following:
--Why this policy exists
Explain that you as the owner/employer take seriously your responsibility to prevent and detect fraud.
--Who this policy applies to
Outline anyone connected to your business practices. Employees, directors, vendors, outside agencies, etc.
--What constitutes fraud
List actions encompassing fraud. Fraud can be so much more than stealing money. Misapplication of funds, forgery, destruction of records or assets, etc. are just some of the ways fraud is perpetrated.
--A reporting structure for employees to voice concern
Empowering your employees to anonymously report suspicious activity creates an atmosphere of trust and safety for innocent parties. Be sure to provide a Fraud Reporting Policy to work in conjunction with your Fraud Policy.
--An explanation of how your company will pursue allegations of fraud, including suspension/termination procedures
Provide assurance that reports of fraud will be responsibly pursued and investigated. Outline what employees can expect to see from their employer should fraud be discovered. This, again, creates trust and honesty among employees, and legally states what steps can be taken towards those who defraud the company.
--A good faith clause and protection for reporting suspicious activities
Address actions to be taken in the event an individual makes false or malicious allegations.
Also explain your procedures for whistle-blower protection. Assure employees they are protected from retaliation and present options for how to report issues of retaliation.
Demonstrate that in fraud prevention and detection, protecting your employees is a prioritized concern.
This seems like a complicated procedure, but once you create your policy and have it reviewed and approved by your legal counsel, you can use it for the life of your company.
Upon their hiring (or upon your creation of this document)*, every employee should sign and date a copy of this policy for your records. To avoid out-of-sight, out-of-mind occurrences, this policy should be reviewed and re-signed by the employee no less than annually.
You have now explained clear expectations of your employees and contributed to creating an atmosphere of integrity.
*As with any official document your employees sign, be sure to have your policy reviewed and approved by your legal counsel.
Empowering small businesses to develop strong Anti-Fraud Programs is our mission. We provide consultations to design, evaluate, and improve your anti-fraud program. You can also get a step-by-step guide to design a program that can be tailored for your specific needs by purchasing Steve Dawson’s book, Internal Control/Anti-Fraud Program Design for the Small Business.
If you think there may already be fraudulent activity in your company, contact us today through our website.
#Fraud #SmallBusiness #CFE #InternalControls #AntiFraud #Monitoring #Verification #controls #ControlActivities #ControlEnvironment #ACFE #FraudPolicy #FraudCaseStudy #FraudPrevention #FraudDetection #ReportingStructure