Do You Have a Fraud-Response Plan?

CU360
January 22, 2010 | COMMENTS

When it comes to disaster planning, most organizations have learned—often through first-hand experience—that the time to plan is before catastrophe hits, not after. But some of these organizations might not have applied this standard to the business risks associated with fraud. They may lack adequate processes to deal with allegations of fraud and misconduct—a worrisome prospect considering the potential impact of fraud.

Not only does the risk of fraud increase in an economic downturn, the recession creates an added challenge for organizations. They must become more efficient with their resources, including those used for responding to and managing fraud allegations.

The overarching goal of a fraud response program is to protect the organization from the economic, reputation, and legal risks associated with the fraud allegation, according to Deloitte consulting.

Fraud management processes, when effectively designed and implemented, can become one of the most critical elements of a credit union's anti-fraud program. These steps, however, should be tailored to fit your organization. Considerations when designing an effective fraud response-management program include:

• Monitor compliance with applicable legal and regulatory standards.
• Confirm that the complaint intake system provides for anonymous reporting.
• Define roles and responsibilities for those involved in the process.
• Establish clear and meaningful investigative protocols to include interviewing, evidence collection, computer forensic examinations, and analysis.
• Identify competent fraud investigation resources in advance of a crisis.
• Use a case management system to efficiently track and log the progress and resolution of fraud allegations.
• Establish consistent reporting within and outside your organization.
• Identify processes and improvements enterprise-wide to help gain efficiencies and prevent recurrences.

A comprehensive assessment of the fraud response-management program assists efforts to improve the effectiveness of the response. Legal, compliance, and fraud risks may be reduced. Significant cost savings can be realized by limiting fraud losses, deterring future fraudulent behaviors, and optimizing the fraud-response process.

Investing in an assessment could produce cost savings and return on investment in the form of:

• More efficient use of resources.
• Lower investigative costs.
• Loss recovery and prevention.
• Increased detection of internal and external fraud.
• Lower compliance risk.
• Enhanced tracking metrics.

Fraud will continue to plague organizations and world markets for some time, notes Deloitte. Preparedness is part of the solution.