More than 1 in 3, or 37%, of today's businesses report being victims of an economic crime, rising to 50% in the financial services, retail, consumer and communications sectors [1]. 

More often than not, the perpetrator is someone you know and trust. As many as 56% of companies that were victim to a financial fraud event reported that the perpetrator was an employee, serving six years or more with the company.*

Unfortunately, theft is a problem for businesses of every industry and scale and financial fraud affects businesses of all sizes - small, medium and large. Common schemes can include expense reimbursement fraud, ghost vendors, payroll fraud, check tampering, forgery, cash larceny, skimming, procurement fraud (kickbacks, bribes, conflicts of interest) and more. In many cases, fraudsters embezzle slowly over multiple years and, when finally discovered, the losses can exceed millions of dollars. 

Fortunately, there is something you can do about it. The first step is instituting a system of strong internal controls, company-wide.

Follow these TOP 10 best practices for fraud prevention:

  1. Install surveillance cameras where transactions are taking place or inventory is stored.
  2. Perform background and reference checks for all new employees.
  3. Create policies and procedures regarding employee theft and fraud. Post them in public areas of the office and even train employees on them.
  4. Perform regular audits of your business operations, including running periodic financial reports and conducting random inventory counts.
  5. Institute checks and balances including: comparing deposit slips with bank receipts, matching invoices before payments are issued and comparing payroll expenses to production schedules.
  6. Ensure division of labor by assigning multiple employees the responsibility of sensitive financial duties like check writing, bookkeeping and payroll. Rotate these responsibilities if possible.
  7. Analyze the credit reports of vendors and other business partners before working with them.
  8. Identify sole source providers and evaluate to ensure their claims are justified.
  9. Create an avenue for employees to report wrongdoings anonymously. This could be a hotline or suggestion box.
  10. Make sure you're insured just in case fraud does occur!

Protect Against Financial Fraud with Crime Insurance 

Even with all the controls in place, the best criminals are still going to find a way to steal. This is where crime insurance comes into play.

While crime insurance provides peace of mind for employee-related thefts, it can also protect against third party theft for crimes like forging or altering checks, robberies, computer fraud (not to be confused with cybercrime), funds transfer and wire transfer fraud.  

Cyber Insurance, which accounts for 24% of reported financial fraud according to PwC's Global Economic Crime Survey 2014, is less about embezzling cash or physical assets and more about the theft of information that belongs to you, your customers and your employees. This growing fraud can weigh heavily on your bottom line both in potential losses and also statutorily, as businesses are required by law to notify victims of a cybercrime breach and offer credit monitoring to them. And, because cybercrime isn't covered by a crime insurance policy, most companies don't have the stand-alone cyber liability coverage they need to be protected. HUB's cyber liability specialists can assist businesses in analyzing and insuring this critical and quickly developing area of liability.

However, not all coverage is created equal and most of today's businesses are unaware of the areas in which they are uninsured/underinsured. There are a number of different policy provisions that can make the difference between whether your financial fraud claim is paid out or not. A crime insurance specialist can help negotiate the right policy and answer the following critical questions: 

  • Are you buying the right coverage parts?
  • Are you buying the appropriate limits?
  • Have you negotiated a favorable language into the policy form? Are you on a loss discovered form?

Specialists at HUB International can provide the necessary analysis to determine just which crime policy is right for your business by providing a variety of services including benchmarking and claims examples to help determine an appropriate limit. HUB specialists can review your crime insurance application to make sure that your risk is properly presented to the market, ensuring that your business receives the most competitive terms upfront. 

 [1] PricewaterhouseCoopers (PwC) Global Economic Crime Survey 2014