Are you looking in the right place? Five tips and tricks to deter financial fraud

Why many businesses are looking in the wrong direction

The results from MNP’s survey exposed a significant gap between the types of fraud respondents are most concerned about in comparison to those businesses are most likely to experience. Theft of information and intellectual property was cited as the highest perceived risk. However, this type of fraud is the fifth most prevalent type of fraud affecting businesses in Quebec.

Similarly, survey respondents also perceived fraud by a supplier or customer and fraudulent disbursements as a high risk. These types of fraud are the fourth and sixth most prevalent types of fraud impacting Quebec businesses in reality.

Asset misappropriation schemes are the most common type of fraud, according to the Association of Certified Fraud Examiners (ACFE)’s 2024 Report to the Nations. However, survey respondents stated that this type of fraud is one of their lowest perceived risks. Likewise, payroll fraud was rated as a lower perceived risk despite being the third most common fraud scheme impacting companies in the survey.

These responses revealed a significant mismatch between the types of frauds that Quebec business owners are most concerned about and those they are most likely to experience. This means that many businesses are looking in the wrong direction — which creates gaps and blind spots for fraud to occur.

How to deter financial fraud within your business

While each business faces unique risks, there are some steps you can take to deter fraud within your organization. We shared three steps in our  to help you prevent your business from becoming a victim of fraud, including remaining vigilant during periods of disruption, resisting complacency, and acting immediately when you suspect fraud. These five tips and tricks can help you reduce the risk of fraud even further:

1. Provide anti-fraud training

Your employees can be the weakest link against financial fraud — or one of your best assets. Proper and regular anti-fraud training can help ensure your employees are aware of the fraud risks facing your business and equipped to help identify and report suspicious activities. It also helps establish a tone from the top that fraud will not be tolerated within your organization.

However, results from our survey showed that only 47 percent of respondents provided anti-fraud training within the past year. Additionally, managers received training more often in comparison to employees. Frequent training for both your employees and management is necessary to keep them up to date as fraud schemes continue to evolve. Surveys by the ACFE consistently show that providing anti-fraud training to employees can reduce the duration and cost of fraud by a third. Additionally, fraud prevention training should be an ongoing process, not just a one-time, check-the-box exercise during employee onboarding.

2. Independent oversight

Many companies lack the experience to accurately determine where fraud risks exist within the business — and knowledge of which controls and measures will reduce the risk of fraud. Additionally, internal oversight can be compromised if two or more parties are working together to commit fraud.

An external advisor can help you identify your specific risks and establish the proper anti-fraud controls and measures to protect your business. Additionally, independent oversight reinforces that fraud is taken seriously within your organization while providing a fresh, unbiased perspective on your operations. A third of respondents reported engaging external consultants or forensic accountants in their efforts to combat fraud, and all respondents were open to using them again. This suggests a high level of satisfaction with the services these professionals provide.

3. Perform a fraud risk assessment

Results from MNP’s survey showed that more than 40 percent of businesses did not perform external reviews of fraud risks or fraud controls in the past year, and more than a quarter of respondents have never performed one. However, fraud risk assessments are crucial to help you understand which areas of your business are more vulnerable to fraud.

Fraud risk assessments enable your business to proactively detect and mitigate fraud before it causes long-term damage to your organization. Additionally, your risk profile is constantly changing as your business continues to grow and fraud schemes continue to evolve. The measures your business took 10 years ago to prevent fraud may no longer be applicable today. Regular fraud risk assessments can help you stay on top of the threats facing your business.

4. Watch for red flags

The results from MNP’s recent survey indicated that staff recruitment and labour shortages were the top concerns of Quebec business owners. However, businesses may overlook background checks in favour of hiring new talent quickly. Another MNP study showed that 16 percent of fraudsters who were in a position of trust were repeat offenders, and a background check prior to hiring could have identified this red flag.

Other red flags for fraud include employees in roles with little oversight or employees who do not share their roles and responsibilities through methods such as never taking vacation. Making the rotation of position or functions mandatory, as well as enforcing mandatory vacation time or leaves of absence, can help mitigate risks to your business.

Additionally, economic factors such as high inflation and rising interest rates increase the risk of fraud both internally and externally. However, owners are less likely than others within businesses to believe financial need is the main motivation for committing financial fraud. Monitoring external red flags such as economic uncertainty can greatly help reduce risks to your business.

5. Develop an efficient reporting system

Whistleblowers revealed 43 percent of all fraud cases according to the ACFE’s 2024 report. However, responses to MNP’s recent survey showed that 84 percent of respondents do not have an alert hotline in place, and that 30 percent of respondents were unaware of this important preventative measure.

While your business may not have a reporting system, developing an alert process can also help reduce the risk of fraud. Implementing an internal process for employees to report their concerns can help your business both empower its employees and detect incidents of fraud early.

Take the next steps

Discover more insights in our whitepaper Misconceptions about fraud risk pose significant threats to Quebec businesses. This report analyzes the results of our survey — and provides insights and tips from our Forensics and Litigation Support Services team to help reduce risks to your business.