When it Comes to Fraud, Prevention Means Education

Earlier this year, an employee of the State of Vermont tried to make a personal purchase online using a check issued from the State. The employee, the sole liability claims adjuster within the office of Risk Management, had asked for a claims check to be returned to her instead of being mailed out directly to the claimant, per usual practice. Thanks to the skeptical check recipient, the State of Vermont was alerted to a possible fraud.

The employee was accused of using her position to falsify a claim and use those funds for online shopping.  What lessons can we learn from this employee’s access to funds and her ability to get as far as she did in committing fraud?

  • No one person should have full control over any aspect of a system. Having just one claims adjuster may help lower the overall employee salary budget, but not for establishing proper oversight. Was there another employee who could have reviewed the cut checks, and another to sign them? Checks and balances are just one tool used to protect an organization from employee fraud.
  • Any departure from protocol should be a red flag. When the check was returned to the adjuster instead of mailed, other employees should have questioned the request. However, even with strong safeguards in place, employees must be trained on how to follow the proper steps to help prevent fraud.
  • This employee may not have been so bold if she knew the State may do a surprise audit at any time.Make employees aware that surprise audits may happen, and follow through with those audits. Fear of discovery can be a powerful fraud deterrent.
  • Just like in this example, many instances of fraud are caught by a third party or a tip. Companies should standardize the reporting process with a way for employees to anonymously report when policies and procedures are not being followed. A hotline is a great way to offer that ability to employees.

Preventing fraud in the workplace is about education.  Employees need to be aware of the company or organization’s fraud policies and the consequences for fraud.  This can help lessen the fraud risk and also give employees some guidance on reporting fraud should they observe any red flags.

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