Fraud prevention and detection

Designing procedures which prevents and detects fraud attempts from both insiders and outsiders to the organisations is vitally important to any organisation.

A deterrent against fraud is important due to the implications that would result if an occurance should happen. Namely –the financial losses organisations will experience in the case of fraud and also to the negative media attention, especially in organisations who deal with public subsidies and money gained from membership.

Donald R. Cressey – an American sociologist and criminologist - has been attributed with the invention of the theory of the fraud triangle.

It works with three factors which are present in every situation where fraud is committed.

  1. Motive (or pressure) – the need to committing fraud.
  2. Rationalisation – the mind-set of the fraudster that justifies them to commit fraud.
  3. Opportunity – the situation that enable fraud to occur (often when internal controls are weak or non-existent).

Any organisation that wishes to guard against fraud should make sure that that these three factors are not present at the same time within the organisation.

Most organisations will focus on detection – thus eliminating the third factor – both due to legal requirements but also as it is the only factor over which the organisation has full control. 

An example of a fraud prevention policy from the Rugby Footbal Union.
An alternative example on fraud prevention policy from Sport and Recreation Alliance.

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