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Business Protection Bulletin


By April 1, 2013No Comments

Not every threat to your business comes from outside. A nationwide survey reported 778 internal-fraud cases in 2012, involving such scams as phony bills (three in four cases), corruption, and expense reimbursements.

In more than half of these cases, the victimized company lost only $200,000 or less. However, fraud causes its real damage through private civil claims, potential government investigations, criminal prosecution, and negative publicity.

To help deal with this threat, experts recommend that businesses create a comprehensive plan to uncover potential fraud and organize a response. Internal fraud is usually detected by an employee tip-off, management review, internal audit, or even a “gut” feeling by an experienced executive. The first step after discovery is to conduct a thorough internal investigation to determine the facts, gather and preserve evidence, assess legal repercussions, and take corrective action – before an outside authority does. Also, being the first to report the incident to authorities can take the sting out of government investigations.

Corrective actions should involve making amends with the “victims,” revising or implementing corporate-compliance programs, and strengthening internal controls. These actions can include offering employees financial incentives to open up about their qualms.

Fidelity and Crime insurance can help protect businesses from the loss of money, securities, and/or inventory resulting from employee dishonesty. Crime coverage can cover the theft of property, losses due to forgery, and electronic wire transfer fraud.

Cyber insurance is essential, especially after a recent court decision which expanded coverage for cyber losses due under a Fidelity bond. Warns one insurance expert, “Not having cyber coverage is like playing hockey without a goalie.”

For more information on fighting internal fraud, feel free to get in touch with us at any time. We’re here to help.