Establishing a Fraud Policy and Oversight Program

Setting up a fraud policy and oversight program is an important step in curbing fraud activity at your company.

Workplace fraud costs businesses an average of 5% of their revenues each year, according to a 2016 study by the Association of Certified Fraud Examiners (ACFE). Check tampering and billing schemes pose the greatest risks based on frequency and average loss amount. The ACFE study also found that small and mid-size businesses had fewer controls in place, making them more susceptible to fraud that can cause substantial financial damage to their organizations.

Setting up a fraud policy and oversight program is an important step in curbing fraud activity at your company. The program should be formally established and should include the following fraud-prevention measures:

  • Know your employees – Perform background checks on potential new hires to avoid bringing a problem into the workplace. Be aware of personal circumstances that may drive a current employee to commit fraud. The ACFE study notes that most fraudsters are first-time offenders and they display certain behaviors such as living beyond their means, personal financial crises, recent divorce or family problems, and unusually close relationships with vendors or customers.
  • Separate authority for financial transactions – No employee should have sole authority without oversight to both write and approve checks or funds transfers. Insist on dual control.
  • Protect checks - Have formal policies in place for the handling and storage of checks. Pre-printed checks should be kept under lock and access to computer-generated checks should be limited.
  • Review expense reimbursements – Expenses should be approved and reimbursed by a different individual than the one who submits the expenses. Employees should submit formal expense reports and detail the business reasons for the expenses.
  • Restrict use of corporate cardsCorporate credit cards are for business expenses only and employees should be prohibited from using them for any kind of personal purchases.
  • Review and reconcile bank accounts regularly – Monitor bank account activity and compare it against the company’s general ledger to spot potential fraudulent activity quickly from both internal and external sources.
  • Secure financial tools and information – Make sure computers, financial files, bank account numbers, endorsement stamps, company stationery and other items that could be used to create counterfeit materials are kept secure. Shred confidential documents so that account numbers cannot be obtained from discarded reports.
  • Limit access to financial transactions – Only those employees whose jobs require access to bank accounts or funds transfer initiation capabilities should have it. Protect and frequently change computer passwords enabling access to bank accounts.
  • Review vendor and client relationships – Spot check invoices to see if duplicate or suspicious bills have been submitted. Review employee interactions with vendors and consider rotating roles to prevent cozy relationships from forming.

A formal anti-fraud program that clearly defines company policies and procedures will help keep employees focused on fraud prevention. Your banker and internal auditor can provide guidance on establishing anti-fraud internal controls, policies and procedures. Review and update your anti-fraud policies regularly to add measures to protect against new threats.

Communication is critical to maintaining a successful anti-fraud program. Incorporate fraud training and awareness into the onboarding process for new hires, as well as into employee meetings, newsletters and intranet sites. Set clear expectations that all employees must follow policies and procedures to prevent and reduce the company’s fraud risks.

“Report to the Nations on Occupational Fraud and Abuse: 2016 Global Fraud Study,” Association of Certified Fraud Examiners; executive summary and downloadable pdf of study available at:

The views expressed by the author are not necessarily those of Fifth Third Bank, National Association, and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank, National Association or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank.