Set up an internal anti-fraud unit

Fraud is a major problem for businesses of all sizes. Fraud can be costly financially, but it can also damage customer reputation and trust. In France, document fraud now causes 42 billion euros in losses per year, or 3 to 7% of business turnover. These data highlight the extent of the fraud phenomenon in France and the urgency of strengthening prevention and repression measures. To fight against this scourge, many companies are setting up internal anti-fraud units. But what are the procedures to follow to set up such a system?

Following a study conducted by Finovox in 2023, in this article, we explain to you the steps to follow to create your anti-fraud unit.

Before starting the various steps we will define what an anti-fraud unit is.

An anti-fraud unit is a department or team within an organization that is responsible for the detection, prevention and management of fraudulent activities. The responsibilities of this unit may include:

1. Monitoring suspicious transactions and activities.
2. The development and implementation of anti-fraud policies and procedures.
3. Staff training on how to recognize and report fraudulent activities.
4. Cooperation with legal authorities in fraud investigations.
5. The use of information technology and systems to improve fraud detection and prevention capabilities.

The exact form that an anti-fraud unit takes can vary depending on the industry and the size of the organization. For example, in a bank, an anti-fraud unit could focus on detecting credit card fraud, while in an insurance company, it could focus on detecting false claims.

First step: Identify “fraud risks”:

What are the risks my business faces? Fraud risks vary depending on a company's industry, size, geographic location, etc. The most common fraud risks include accounting fraud, contract fraud, payroll fraud, payroll fraud, and cybersecurity fraud.

Your business could face:

1. Supplier fraud: Employees may charge the company for products or services that were never provided. This fraud is often carried out in collusion with a complicit supplier.
2. Insurance fraud: Employees can falsify claims or accident reports to obtain fraudulent payments.
3. Subscription fraud: false papers in order to open an account, request credit or subscribe to a subscription without paying for it...

And many others...

Once risks are identified, the company can put controls in place to prevent and detect fraud.

Step Two: Train Staff

The second step is to train staff on the fraud prevention policy and on the internal controls put in place. This training should include information sessions on the risks of fraud that the company faces, the tell-tale signs of fraud and the consequences for those who commit fraud but also for the business. Training should be updated regularly to take into account new fraud risks and new internal controls.

To do this, you can call on trainers specializing in fraud that you want to deal with as a priority but also provide training on fraud more generally. Do not hesitate to contact us so that we can refer you to our training partners who will be happy to assist you in training your teams.

Training is essential to make employees aware of the risks of fraud and to enable them to detect the warning signs. It also makes it possible to establish a culture of fraud prevention within the company, by explaining the associated risks and by showing the importance of this prevention for the financial health of the company, its reputation and its sustainability. In addition, training can help create a team of people responsible for fraud prevention within the company, in order to strengthen internal control measures and to monitor suspicious activities. It is therefore essential to ensure that all employees, regardless of their hierarchical level, receive regular fraud prevention training to ensure ongoing vigilance against fraud.

Step Three: Establishing a Fraud Prevention Policy

The third step is to develop a fraud prevention policy. This policy should be clear and concise, and should describe the steps the business will take to prevent fraud.

Establishing a fraud prevention policy is an important step in protecting your business from fraud risks. Here are the steps you need to take to establish an effective policy:

1. Establish controls: Put controls in place to prevent and detect fraud, such as segregation of duties, monitoring access to computer systems, implementing a code of conduct, and training employees on fraud detection. Logical security controls, such as passwords and computer security measures, and financial controls, such as bank account access controls and regular financial audits can also be put in place.
2. Appoint a fraud prevention officer: Appoint a person responsible for fraud prevention within the company who will be responsible for overseeing checks and reporting cases of suspected fraud.
3. Update the policy regularly: The fraud prevention policy should be updated regularly to reflect new risks and changes in the business.
4. Equip yourself with additional solutions to allow you to fight against new fraud mechanisms, which are difficult to detect with the naked eye. This will allow you to increase detection rates, improve the operational experience of analysts, and allow you to become a team of augmented experts.
5. Define fraud management processes: How are we going to manage fraudulent activity? What is going to happen? What are the risks identified? What monitoring or consequences will be put in place?

By following these steps, you can establish an effective fraud prevention policy that protects your business from fraud risks. The fraud prevention policy should also spell out the consequences for those who commit fraud.

Step 4: Set up a fraud reporting system

The fourth step is certainly one of the most important and consists in setting up a fraud reporting system. This system should allow employees to report suspicious or fraudulent activity. Employees should be encouraged to report suspicious behavior without fear of reprisals. Indeed, for the reporting system to work effectively, it is important that employees feel confident to report suspicious activity without fear of reprisals or sanctions. Thus, the company must put in place clear and transparent procedures for managing fraud reports, in order to ensure the confidentiality and anonymity of those who report fraud.

It is also important for the company to take all reports of fraud seriously and to promptly investigate reported suspicious activity. Employees who report fraud should be informed of the results of the investigation and the steps taken to prevent the recurrence of these fraudulent activities.

Finally, to ensure the effectiveness of the reporting system, the company must promote a culture of responsibility and integrity by regularly informing employees about the progress made in fraud prevention and encouraging them to report suspicious or unethical behavior. This culture should be supported by clear and regular communication of fraud prevention policies and procedures, as well as concrete measures to promote ethics, such as codes of conduct, compliance programs, and business ethics training.

Fifth step: Optimize detection

Once the anti-fraud unit is in place, it is important to seek to optimize it. With this in mind, adopting external solutions can go a long way in improving fraud detection rates.

In the fight against fraud, various complementary solutions can be implemented. When it is necessary to verify identities mainly, it is possible to use various Know Your Customer (KYC) solutions available on the market. These solutions make it possible to verify the authenticity of the information provided by customers and to detect possible fraudulent identities.

When it comes to the analysis of non-standard documents, the use of Finovox can prove to be a valuable asset. Finovox makes it possible to examine the documents thoroughly and to detect possible alterations or suspicious changes. This makes it possible to identify fraudulent documents and to take appropriate measures to prevent fraud attempts.

By combining these various solutions, an anti-fraud unit can strengthen its ability to detect and prevent fraudulent activities, thus offering increased protection to the organization against financial losses and damage to its reputation.

Would you like to know more about a solution for detecting false documents like Finovox?
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