Whether you like it or don’t think it’s the best option, remote work is here to stay and is only likely to become more prevalent going forward. There are upsides to remote work, including as an employer the fact that it gives you access to a broader talent pool. There are also downsides. One such downside is the higher risk of fraud remote work can create.
If you’re an employer or manager, there are general ways to combat these risks. For example, choosing technology solutions with centralized visibility like AP automation platforms is helpful.
Before you can start putting in place particular solutions and frameworks to combat the fraud risk that comes with a remote work environment, however, you need to know the real risks.
The following are things to know about remote work and its links to an increased risk of fraud.
COVID-19, Fraud and Compliance Risks
In the spring of 2020, we were all thrown into a new world that was scary and uncertain. The COVID-19 pandemic required businesses to almost overnight move many of their employees into a remote work situation.
There was an enormous number of disruptions to businesses, and those disruptions made an environment primed for fraud, with many of these scenarios harder to detect.
Businesses of all sizes were forced into taking rapid actions without their standard protocols to follow or without due diligence. Governments were and, in many cases, still are sending financial aid to businesses with limited safeguards in place. Employees were and continue to work remotely, meaning they have less security and supervision. Employees are also facing tremendous stress, which can be a component of fraudulent activity.
In 2020 all types of occupational fraud rose. Ninety percent of certified fraud examiners said we’ll see similar trends throughout this year.
The rise is attributed to employees working in a less secure environment, with a considerable increase in digital communications.
If employers lost certain benefits or perhaps have had to take pay cuts, they may feel justified in engaging in fraud. It’s easier to create fake signatures, falsify invoices or accounting documents, and request payments fraudulently. There’s a lack of controls still going on, along with declines in face-to-face interactions.
We’re now nearly two years into the pandemic, which means employers don’t have an excuse for not being prepared anymore. They’re taking a hard look at their shortcomings as far as managing fraud risks.
Another scenario that you may be forced to contend with right now is the major supply chain disruptions that are continuing and worsening. That means you might have to make fast decisions on third-party relationships without pursuing your typical due diligence.
When you’re a business struggling to survive, fraud can thrive.
Specific Fraud Risks
While it can vary depending on your business, some of the particular fraud risks that may be prevalent right now include:
Data theft:
Your employees might have not only unsupervised access to files and systems but perhaps more access than ever before. Employees could ultimately steal customer data, proprietary information, or it could lead to lost funds. If you’re in an industry where your employees work with especially sensitive information, like health care, data theft can be an especially significant risk that could leave you facing regulatory issues.
Time theft:
Time theft among remote workers is something that can be incredibly hard to detect. Most employees, of course, will be honest about logging work time, but not everyone will be. Time theft can look like a lot of different situations. For example, your employee could log on and then proceed to watch a movie. During work hours employees might be running personal errands, or your hourly employees may simply say they worked more than they did.
Payroll fraud:
When you have remote employees, monitoring payroll becomes more challenging. For example, verification that paychecks are sent out on time to the right people is more cumbersome. When your employees work in different locations from one another, it’s also harder to separate things like writing and signing checks. Specific examples of payroll fraud include ghost employees, timesheet fraud, and paycheck theft.
Worker’s compensation fraud:
You might not have even considered it, but when your employees’ home is their workplace, injuries and illnesses can become an issue. If someone is working remotely and get hurt, how do you know if they were actually “on the job” when it happened?
So, what can you do across the board to minimize the potential for fraud among your remote workers?
Mitigating Fraud Among Remote Workers
One of the first areas to focus on to create a strong foundation, particularly if you plan to continue having remote work be part of your business, is your internal policies. Your internal policies are going to guide every other aspect of your anti-fraud strategies. You need to educate and train your employees on what’s acceptable as remote workers and what’s not.
As was mentioned above, having the right technology and software solutions in place is an integral part of identifying and reducing fraud. For example, when you have AP software, you can visually see everything happening at any given time. Cloud-based automation solutions provide you with flexibility, but you can create that sense of control that you might have when every employee is in the office.
When you automate critical processes in your business, not only do you have the visibility to detect fraud quickly, but you’re also reducing human error.
You should do regular access audits as well. You need visibility into who has access to what, and you should be utilizing the principle of least privilege. Every employee should have access only to what they need to do their jobs and nothing more.
Going back to the example of AP automation, you can eliminate paper checks, which is one of the most significant sources of both fraud and errors.
Your goal at this point, if it looks like your team will continue working remotely, should be creating sustainable policies and practices and facilitating them with technology.
You have to give yourself an overview of everything happening in your business, no matter where employees are actually working.
