How to Use the Camera Effect to Kill Fraud

The threat of being seen diminishes theft

43% of fraud detection comes by way of tips. This is why whistleblower programs are the number one means of reducing theft. Time and time again the Association of Certified Fraud Examiners’ surveys prove that whistleblower programs lessen the number of and dollar amount of frauds. Employers provide 1-800 numbers whereby employees can anonymously report potential red flags 24/7. So why would a telephone number reduce fraud?

The camera effect.

Fraud Prevention

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We know that when potential fraudsters believe their thefts will be detected they will often stay clean. No one wants to go to jail. No one desires to embarrass themselves or their family members.

The key is to introduce the threat of discovery.

We don’t necessarily need a program that detects every theft (which can be quite expensive), but we do need potential thieves to believe–that if they take–they will get caught.

This is why whistleblower programs are effective. When in place, such programs make employees feel that others will see and communicate fraud signals such as the new $80,000 car on a $40,000-a-year income. Think of the whistleblower programs as lots of roving cameras recording and communicating actions in real time. Now employees think, “If I take, I might be seen.”

When I teach fraud prevention classes, I turn a security camera on, and it whirls and turns making class members feel as though they are being recorded. It’s funny; people act differently when the eye of the camera is on them. They sit up straight, fix their hair, smile. After the camera rotates a couple of times, I say, “The camera is not hooked up to anything. You are not being recorded.” What did I just do? I made them think they were being taped.

My point: We want employees to believe their actions are visible though they may not be.

Examples of Fraud Prevention Using the Camera Effect

Here are examples of fraud prevention steps that create the camera effect:

  • Someone outside of the accounts payable department randomly selects ten cleared checks each month and reviews the payee, the signature, and the invoice support (and the accounts payable personnel know this occurs)
  • The bank statements are mailed to someone outside of accounting who opens them and inspects the contents before providing the statements to the accounting department (even if the bank statements were only opened and the contents were not reviewed, the accounting department thinks the checks are being reviewed)
  • An outside CPA or CFE performs surprise tests of accounting information twice a year, picking whatever area she desires to inspect (now everyone knows their work might be reviewed)

Your Camera Effects

What fraud prevention procedures have you implemented that create the camera effect?

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2 thoughts on “How to Use the Camera Effect to Kill Fraud

  1. I agree that robust whistleblower programs and tip lines can be extremely effective, but they have to be continually marketed and promoted. If they’re not, they become dormant and ineffective and just another expense. I also think any organization needs to avoid and reject fake internal controls. Don’t try and con a con. If you are going to the trouble of creating an internal control, make it a cost effective and valuable internal control. Don’t ever just go through the motions. People will get wind of that kind of activity and management’s credibility will fall in the eyes of the employees. That could backfire in that people may begin to grow negative feelings toward management, possibly increasing the risk of fraud.

    Instead of 10 random checks each month, review all invoices from any new vendors. Having a second party opening and reviewing the bank statements should be required in all small organizations, but it needs to be done thoughtfully. It becomes unmanageable with even a mid-sized organization, depending on check volume. Instead of a surprise test of some random area twice a year, do a rolling update of existing workflow and related internal control for the various key accounting processes. Don’t forget to review the organization’s credit report at least once a year.

    • Benson, all good thoughts. Sorry if the post sounded like I’m promoting just going through the motions with controls; not my intent. I’m simply saying the presence of potential detection keeps many potential fraudsters at bay. I do think controls should be in place and actually performed. You are right. If employees notice that controls are not actually being performed, they may take advantage of the weakness.

      Also the examples I gave are not intended to be a full set of such controls, just sample ideas. Thanks for sharing your thoughts.