AS businesses wade through the new landscape, boosting digital transformation initiatives, improving work-from-home arrangements and securing data from cyberattacks are just some key areas of focus of most companies. Against this background remains an age-old issue that organizations continue to face and address - fraud in the workplace.

Occupational fraud is defined by the Association of Certified Fraud Examiners (ACFE) as the use of one's employment or occupation to deliberately misuse or misapply his or her organization's resources or assets. The end benefit may be personal enrichment. Occupational fraud can be committed by employees across all corporate levels, from rank-and-file, supervisors and managers to top executives.

Our common notion of fraud in the workplace is that it constitutes large-scale misappropriations. However, it can also be committed through small acts. Think of bringing home from the office and for one's personal or family use company assets like pens, notepads, envelopes and other small objects provided at work. Does this constitute fraud? These acts may be considered fraud, more so when there is a blurred line between what is seen as perks of the job and small acts of fraud. What is important to note is that small amounts misappropriated eventually balloon over time and if not managed, can cost a business big amounts of funds.

How much is actually lost due to fraud in the workplace? Statistics released by ACFE in its 2020 Report to the Nations, a global study on occupational fraud and abuse, reveal that there were 2,504 cases of internal fraud cited across 125 countries. These cases caused total losses of more than $3.6 billion. A closer look shows that organizations lose approximately 5 percent of revenue every year to fraud. The average loss per case of fraud? Approximately $1.5 million.

The most common classification includes corruption, asset misappropriation and financial statement fraud. According to the report, of the three, corruption is considered the most common scheme used. Meanwhile, financial statement fraud is considered the least common but the costliest.

Almost half of cases of fraud in 2020 (43 percent) were detected through tips. Half of these tips came from employees, through phone or email.

The onset of the coronavirus disease 2019 (Covid-19) crisis and virtual office settings did little to put a stop to fraud. In fact, local news reports show cases of Social Amelioration Program (SAP) misappropriations and pandemic-related scams perpetrated by the people. In other countries, incidents of fraud continue to rise. These only show that fraud continues to threaten organizations' operations regardless of setting and business conditions.

To successfully ward off potential fraud and save businesses from incurring massive financial losses, addressing incidents of potential fraud is key. Grant Thornton and ACFE collaborated to produce the Anti-Fraud Playbook to help organizations fight fraud in their workplace. The playbook outlines five plays that businesses may take to address fraud. These include fraud risk governance, fraud risk assessment, fraud control activities, fraud investigation and communication, and fraud monitoring.

The concept of fraud risk governance demonstrates the expectations of the board and senior management to commit to a set of integrity and ethical values that is tailor-fit to the unique needs of the organization. Through a maturity assessment guide, businesses can develop their own roadmap and address the gaps so they can achieve long-term plans. Thinking like a fraudster also helps.

Brainstorming about possible schemes that fraudsters can use to commit fraud is important. This helps businesses prepare and nip fraudulent acts in the bud.

Investing in fraud control activities helps companies navigate through fraud prevention, detection and response. Moreover, using data to uncover fraud means utilizing data analytics and business intelligence to map out known patterns of fraud.

Fraud investigation and corrective action must be in place to ward off potential fraud. Maintaining an anonymous reporting hotline to report fraudulent acts, like the ProActive anonymous reporting hotline of P&A Grant Thornton, supports organizations in maintaining the confidentiality, anonymity and security of tipsters.

Fraud monitoring, an equally important activity, entails performing ongoing or periodic evaluations to ascertain whether all the elements of an effective fraud management roadmap are present and functioning. Keeping reports of fraud monitoring initiatives will help provide insights on the effectiveness of fraud management programs.

Fraudulent schemes in the workplace are constantly evolving. As these schemes get more sophisticated, the best course of action for businesses is to ensure that effective anti-fraud mechanisms are in place to avoid potential losses and to thrive amidst ever-changing business conditions, particularly in the new normal.


As published in The Manila Times, dated 23 June 2021