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Good Self-Defense Strategies Will Help Protect Your Business From Fraud

Several years ago I took a basic self-defense class. I learned effective combat skills, but the most valuable lessons I learned concerned:

• •  Being mentally prepared
• •  Proactively avoiding problems before they occur
• •  Recognizing dangerous situations and identifying emerging problems
• •  Planning safe, effective responses to dangerous situations

Controls are key to self-defense. Several universal concepts come into play whether you’re defending your life, your honor or your assets (on behalf of yourself, your family, employees, vendors or customers). Use the following self-defense strategies to protect your business from fraud.

Develop an Awareness of Danger

This is your first line of defense. You must raise your level of awareness to continually recognize that fraud exists and can happen to you.

When you sense danger, trust and act on your “gut response.” For example, if you see an employee furtively slide one sheet of paper beneath another when you walk into the room, or he can’t give you logical answers when you ask specific questions, or she acts defensive when you look in her desk for information you need, don’t ignore your sense of unease. Investigate.

Control Your Environment

You’d plan ahead so you wouldn’t have to walk alone through a dangerous part of town at 2 a.m. Likewise, think ahead about possible fraud scenarios so you can avoid or detect them. For each asset at risk:

• Consider how it could be used improperly or illegally. Blank checks are but one example of such an asset — it could be easy for someone to steal and use some of your blank checks.
• Re-evaluate current risky practices. Do you store your blank checks in a box next to the printer?
• Develop effective prevention techniques. Store your back stock of blank checks in a locked, fireproof filing cabinet and lock limited quantities of your current check stock in a secure drawer in the accountant’s office.
• Practice backup and contingency plans. What do you do if someone needs to pay for a delivery and the checks are all locked up?
• Monitor usage. To keep tabs on your blank checks and ensure none are missing or used improperly, try keeping back stock in security-sealed boxes, periodically counting current check stock, using manually-prepared check number/approval logs and performing interim and/or immediate bank reconciliations.
• Prepare your weapons. Develop procedures to recover the asset if it has been used fraudulently or if its security has been compromised. Here are some steps you might take if anyone has left some blank checks lying around or you discover some are missing:
  • Immediately contact the bank to see if the checks have cleared; make a stop-payment request if they haven’t and file a police report for stolen checks that have cleared the bank.
  • Meet with the bank’s security officer to determine the next steps.
  • Change bank accounts.

Many other assets are at just as much risk as those blank checks. You should apply the six steps outlined above to all your vulnerable assets.

Don’t Look Like a Victim

Here are some examples of business weaknesses that contribute to fraud or allow it to occur quietly and undetected over time:

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