itnewsafrica.

com

SMEs most financially vulnerable to fraud attacks

6-7 minutes

June 29, 2018 • Security, Startups, Top Stories

SMEs most financially vulnerable to fraud attacks.

Fraud affects small businesses much more severely than large

corporates, with global research revealing that small and medium
enterprises (SMEs) generally lose twice as much money than their
corporate counterparts in the event of employee fraud.

Discussing the most recent statistics compiled by the Association of

Certified Fraud Examiners (ACFE)1 and putting it into a South Africa
context, National Director of Forensic Services at Mazars and
Accredited Certified Fraud Examiner, Christo Snyman, notes that the
average loss reported from a single incident of fraud was as high as
$200 000 (~R2.7 million) for companies with less than 100 employees.

“This is a shocking statistic when taking into account that smaller

businesses have every chance to go under following such a loss. It is
also worth noting that larger businesses only lose $104 000 (~R1.4
million) from a single fraud event by comparison.”

He adds that the main reason for this disparity is also made clear by
the research. “From the report we can see that around 25% of fraud
cases detected in large companies were as a result of improper
internal controls, compared to the 42% attributed by small businesses
for the same reason. Further to this, the biggest risks faced by small
businesses are also different when compared to their larger
counterparts, with 43% of fraud cases taking the form of corruption,
and 22% of cases being noncash fraud (electronic funds transfers, for
example). Corruption and noncash fraud only appeared in 32% and
16% of cases for large corporates, respectively.”

Snyman adds that a lack of anti-fraud controls within a small company

enables fraud to continue for much longer. “The vast majority of these
fraud cases were committed by employees, and, if a company cannot
effectively monitor the activities of the people inside its organisation, it
may take years before it is discovered.”

The average duration of the fraud schemes captured in ACFE’s report

was 16 months. “An important piece of information that one can take
from this report, is how vital the implementation of a fraud hotline. The
research shows that fraud losses were around 50% smaller at
organisations with hotlines, than at those without, and that hotlines
were responsible for bringing around 42% of fraud cases to light.”

Snyman explains that SMEs in South Africa should use this information
to put better preventative measures in place for their organisations. “A
well-structured set of measures to monitor and prevent any acts of
employee fraud is, of course, of vital importance. Along with this,
ACFE’s report shows us that all businesses need to put systems in
place whereby employees can anonymously report fraud taking place.”

He adds that it is crucial to understand the profile of the average

fraudster. “Company Directors and members of an organisation’s
management have been shown to be more likely to commit fraud, and
employees in charge of cash transactions need to adhere to strict anti-
fraud measures. Organisations need to keep an eye out for warning
signs, such as employees who start living beyond their means, develop
addictions or spiral into debt, and companies need to put support
programs in place to help employees through difficult stages, if need
be.”

Lastly, Snyman says that it is imperative for businesses to conduct

ongoing internal audit reviews of their operations. “Bringing in a third
party to conduct an internal audit is the first step in creating iron-clad
anti-fraud measures. Make sure that one’s company has dual controls
in place when affecting payments, as well as a zero tolerance policy
towards fraud, which, if revealed, results in disciplinary action or
criminal prosecution,” Snyman concludes.

Edited by Fundisiwe Maseko

Follow Fundisiwe Maseko on Twitter
Follow IT News Africa on Twitter

These content links are provided by Content.ad. Both Content.ad and

the web site upon which the links are displayed may receive
compensation when readers click on these links. Some of the content
you are redirected to may be sponsored content. View our privacy
policy here.

To learn how you can use Content.ad to drive visitors to your content or
add this service to your site, please contact us at info@content.ad.

Family-Friendly Content

Only recommend family-friendly content

Website owners select the type of content that appears in our units.
However, if you would like to ensure that Content.ad always displays
family-friendly content on this device, regardless of what site you are
on, check the option below. Learn More

cyber crimefraud schemesIT NewsSecuritytech newstechnology news

« Highlights from the Mobile World Congress Shangai United Nations

experts visit Kenya to assess human rights and business »