Call-backs and cross-checking invoices can't stop fraud collusion, but an effective complaints management platform can

Many companies implement payment controls to combat and prevent fraud related to fake invoices, altered payment details, and fraudulent loans. However, one type of fraud that can be particularly difficult to detect and prevent is collusion fraud.

This type of fraud involves multiple perpetrators, often both inside and outside of an organisation, working together to defraud the company – and controls are often unable to completely resolve a situation where there is collusion involved.

According to the latest ACFE Report to the Nations 2022, collusion fraud can come with significant costs for organisations. The median cost to an organisation where one person colludes with another is AUD $57K, if two people collude with another the median cost is AUD $145K, and if three people collude with another, the median cost to an organisation is AUD $219K.

What is Collusion Fraud?

Collusion fraud is a type of fraud that involves multiple people working together to defraud an organisation. This can include employees, vendors, or other third parties. The fraud may be carried out through fake invoices, changes to payment details, or fraudulent loans. The key characteristic of collusion fraud is that it involves multiple people working together, making it more difficult to detect and prevent than other types of fraud.

Why is Collusion Fraud So Difficult to Detect?

One of the reasons collusion fraud is so difficult to detect is that the methods used to carry out the fraud can be very sophisticated. For example, payments may be made to legal entities where all cross-checks would seem to be correct. Additionally, fraudsters may use a variety of different methods to cover their tracks, making it difficult for investigators to identify any suspicious activity or wrongdoing.

Another reason collusion fraud is difficult to detect is that it can be carried out by people who have legitimate access to the organisation's financial systems. This makes it difficult for organisations to identify fraudulent activity without the help of internal controls and other anti-fraud measures.

Preventing Collusion Fraud

As discussed in previous articles, your staff are your eyes and ears and are often the first to see behaviours that might indicate fraud or collusion. Given the significant costs associated with collusion fraud, it is important for organisations to take steps to prevent this type of fraud from occurring.

One of the most effective ways to do this is through the use of an effective high-quality third-party Whistleblower and Complaints Manager platform. An external whistleblower and complaints management service provide anonymity to staff members, which increases the likelihood that staff will lodge a complaint before the fraud results in a financial cost or reputation damage for the organisation.

A high-quality external whistleblower and complaints management service should deliver the following benefits:

  • Confidentiality, impartiality, and anonymity are ensured
  • 24-hour online reporting, email, and telephone call service
  • Investigators and call takers with expertise in obtaining quality information from callers (no call centre)
  • Access controls
  • Secure data management with all data retained in Australia
  • De-identified reporting capability.

Through a combination of effective controls and the use of an external whistleblower and complaints management service, organisations will be able to better manage the serious threat of collusion fraud and its associated costs. It will provide anonymity to staff members, increasing the likelihood that staff will report suspicious activity before it results in financial losses or reputation damage for the organisation.

By implementing a high-quality external whistleblower and complaints management service, organisations can protect themselves from the costly threat of collusion fraud, while also promoting a culture of integrity within the organisation.

At PKF, we specialise in managing whistleblower and other types of conduct complaints with the added benefit of an independent whistleblower and conduct complaints management system. If you would like to know more about what we do and how we do it, please see our services here.

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