Fraud in the Family Business
In the last week I have heard three stories of fraud in business. Each of them happened to occur in businesses owned and operated by families. I have also attended a KPMG presentation where, in their recent survey, they state the ‘value of fraud rose by 16% between April 2016 and September 2016, to a total of $442m’ in Australia alone.
Many perpetrators work from inside the business. Sometimes the culprits are family members. My story tellers all had their perpetrators working for them as trusted employees. Two out of the three found out by chance while the employee was still working for the business and the third business found out almost a year after the theft took place. The challenges faced are more than just monetary. The emotional pain can be huge. There is also the challenge to the values and culture always at play in family business, and any other business too.
Fraud comes in many shapes and sizes, and in general terms, it happens through gaps in systems, working around systems and breaking of systems. IT fraud is growing as well. In recent times, individuals have had their identities stolen and money withdrawn from their bank accounts almost immediately. One person, reported in the press, had to freeze her business and private bank accounts ….. and wages were due for over 100 employees.
Are you looking for fraud? Where are you looking for fraud? How do we prepare for fraud? And what do you need to pay attention to?
A few precautions to protect yourself from fraud and cyber crime are:
- Do not give any personal information to organisations or people before verifying their credentials
- Many frauds begin with a phishing email. Remember that banks and financial institutions will not send you an email asking you to click on a link and confirm your bank details. Do not trust these emails even if they look genuine – (UK Police)
- Destroy and preferably shred receipts with your card details on them and mail with your name and address on. I density fraudsters don’t need much information in order to be able to clone your identity – (UK Police)
- Make sure your computer has up-to-date anti-virus software and a firewall installed. Ensure your browser is set to the highest level of security notification and monitoring to prevent malware issues and computer crimes
- Keep track of Purchase Order documents and Invoice documents. Have a check and balance system in operation.
- Annual reviews of existing processes and systems to find gaps.
By TEC Chair John Broons – May 18, 2018
About the author: John Broons – Is a an accredited Specialist Family Business Advisor and Fellow of the Family Firm Institute (Boston, USA) CFBA, ACFBA. John works with decision makers in family businesses of all sizes to get clarity and focus around family relationships and business success. John also coaches and mentors business owners and executives in creating, challenging and focusing their business strategy.
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