Episode ID S1E04
April 22, 2020
CoBank’s Fraud Wise helps you avoid becoming a victim of fraud. It’s a sad fact that employees are sometimes responsible for fraud against their own companies, potentially stealing significant amounts of money. In this episode of Fraud Wise, we’re talking about internal controls you can put in place to reduce your risk of employee fraud.
Hello, this is CoBank’s Fraud Wise, helping you avoid becoming a victim of fraud.
It’s a sad fact that employees are sometimes responsible for fraud against their own companies, potentially stealing significant amounts of money. In this episode of Fraud Wise, we’re talking about internal controls you can put in place to reduce your risk of employee fraud.
Employee fraud is most often committed by people whose job responsibilities include dealing with financial transactions. There are several processes and practices that can control access to financial assets.
First, require dual approval for all financial transactions, which can involve requiring two different employees check each transaction or by having an outside approval by calling a known telephone number for the recipient.
Also, establish a separation of duties so the same person isn’t initiating and approving funds transfers. This puts two sets of eyes on transactions, which can make it more difficult to commit fraud.
You can also set transaction limits by role, so large transfers are handled by a very limited number of employees.
You should also consider rotating employees through department roles so no single employee has consistent access to initiating financial transactions, and require that all employees take an annual vacation with no access to the accounting system. In their absence, you can review the transaction history for anomalies.
Other steps to protect against employee fraud include locking check stock in a secure location to reduce access, using a locked mailbox when mailing checks, and using electronic payment options whenever feasible.
We also recommend having a dedicated computer to conduct banking functions, and limiting access to that computer to those who truly need it.
Passwords to all financial systems should be changed regularly, and logins should be deactivated any time an employee leaves the department or the company. And of course passwords should be kept highly confidential.
While most employees are honest and dedicated to their organization’s mission, these internal controls can reduce your risk from the very rare employee with nefarious intent.
This has been CoBank Fraud Wise, helping you protect against fraud.