Did you know this is International Fraud Awareness Week (November 17-23)? Well, now you do! Here at GroupOne Background Screening, we thought this would be a great opportunity to discuss how to protect your company from fraud.
With advances in technology, including artificial intelligence (AI), many companies have implemented sophisticated fraud prevention and detection strategies. But it’s not rocket science! One crucial step in safeguarding against fraud is conducting thorough background checks. This is especially important for those working in positions of trust.
Where does fraud take place?
The Association of Certified Fraud Examiners (ACFE) reported that individuals who commit fraud share these traits:
- They hold positions of trust, providing them access to an organization’s assets;
- Two-thirds of frauds are perpetrated by executives with veteran experience who know how to cover their tracks;
- 74% of fraud cases are committed by men – sorry guys!
Fraudulent applications
Here’s a recent example of how a thorough background check could have prevented fraud. A man was appointed as Chief Information Officer, securing a high-paying role with an annual salary of $270,000. But his position was obtained through deception. He fabricated his résumé with false educational and employment history, and provided fraudulent references, including impersonating a former colleague.
During his first month in the role, he arranged for his brother to be awarded a contract role, despite zero qualifications. Thankfully these actions, along with his fabricated résumé, were soon uncovered leading to his arrest. Because a proper background check was not conducted prior to the man’s hiring, the company lost an estimated $55,000. That’s small change, considering a company’s average loss due to fraud is $1.5 million, according to the ACFE.
Watch for red flags!
The 2024 ACFE’s Report noted 84% of fraudsters did not have an appropriate criminal or employment history check. This should highlight the importance of not only conducting a criminal history check, but verifying qualifications, work history and references. The ACFE also found that 20% of job applications contain false information.
Here’s a scary number – the ACFE noted that in 16% of the cases where a background check had been conducted on an eventual fraudster, the résumé revealed a red flag. But the company hired them anyway. Employment gaps, lack of references, frequent job changes and incorrect résumé information are a few red flags to consider.
Tailor your background screening
GroupOne recommends reviewing your company’s approach to conducting background checks. You should tailor the investigation for each applicant based on the potential risks associated with their position, thus ensuring senior executives and those in high-risk roles such as finance are subject to the most vigorous background checks.
Here at GroupOne when conducting background checks for clients on high-risk hires, we independently verify qualifications, conduct criminal history checks, review public record sources such as bankruptcy, litigation, and in some cases, identify and speak to individuals who have previously worked with the candidate.
Organizations should commit to not just performing background checks but acting on the results—especially when red flags emerge. By doing so, you can significantly reduce exposure to fraud and safeguard your organization’s assets and reputation.