Fraud protection education and policies are a vital part of
any successful business. They help cultivate an ethical work environment and
encourage employees to conduct all transactions with honesty and loyalty.
Procurement scams are the perfect introduction since they complicate business
transactions between companies of all industries and sizes. Continue reading
for a brief overview of why your business should educate workers about
procurement and the types of scams to recognize.
Why Procurement
Fraud Protection?
Procurement fraud protection helps your business avoid losing projects, money, products, or your
reputation due to being scammed by a vendor and complicit employee. Procurement
encompasses the relationship formed between you or your business and another
company or individual for the purpose of exchanging goods or services. Some
vendors and employees will exploit this relationship for their own ends and
defraud your business in the process. This causes you to lose money, products,
and damages your reputation. High-risk businesses include those who manage any
purchasing, transaction purchasing, misappropriations, or government,
manufacturing, or bank contracts.
Procurement Scams
to Recognize
·
Conflict of Interest
Conflict of interest fraud protection means keeping an eye
on employees who deal with clients on a regular basis or whose monetary
compensation rely on the successful relationship with a customer. Sometimes the
worker will accept gifts or money for themselves or hide them with friends and
family. Conflicts of interest also apply to an employee granting a contract to
a person or company solely due to their acquaintance. Question an employee who
insists on keeping a vendor who receives poor reviews or whose financial wealth
suddenly increases after a confirming a new high-priced contract.
·
Bid Rigging
Fighting bid rigging requires strict internal fraud
protection through established oversight because it implicates a conspiracy
between a business employee and a contracting company. The two collude in
private to hire a specific contractor or to be hired by a firm by committing
the contract prior to the bid, but allowing the auction to continue. Be wary if
you see an employee accept a bid for an unqualified company or the bidding
process seems manipulated.
·
Ghost Vendor
Another internal fraud policy to establish helps prevent a
scam with a nonexistent supplier. Regular audits of all financial documents by
a third party ensure no one in your accounting department created a ghost
vendor and submitted fraudulent invoices to steal money from the company.
Random checks of accounting documents will reveal doctored or missing invoices
for companies you do not recognize. A guaranteed way to confirm if an employee
has fabricated a company is to check their address, or known associated
addresses, against the company’s. If they match, you have your proof.
·
Political Bribery
If your business
accepts contracts from the government or performs international transactions
with foreign companies, ensure you follow the fraud protection and corruption
policies from the United States Foreign Corrupt Practices Act (FCPA). This
makes the bribing or coercion with foreign governments and companies with the
object of procuring or retaining business. Align your company’s policies with
those of the FCPA by establishing tight internal regulations over your
accounting and transaction records departments. Educate your workers and
encourage them to report offers of bribes to the proper authorities.
Promote ethical
decision making and loyalty in your workers so they do not feel inclined to
accept deals that will negatively impact the company. Keeping them
well informed of possible scams and maintaining rigorous accounting oversight
gives your business the best chance at procurement fraud protection.
