Anti-fraud training

The Swiss financial industry values pre-employment screenings because they’re considered to be an effective anti-fraud strategy. But what about other preventive measures like corporate anti-fraud training programs? Does it pay off to invest in this area?

In 2016, we surveyed 18 Swiss companies — only banks and insurers — about their anti-fraud training programs.¹ The findings can be benchmarks for organizations and provide insights into how to enrich programs.

Much of our study’s results are easily transferable to any industry in any country. Some ideas could represent a starting point for making anti-fraud training in your organization more powerful. Findings obtained from an online survey and several face-to-face meetings show there’s still room for improvement. At the same time, our respondents provide fascinating insights that could make corporate training more effective.

What do we need to think about when developing corporate anti-fraud training programs?

Find your own style of anti-fraud training

According to our findings, some Swiss banks and insurers provide companywide anti-fraud training. Fourteen of the 18 companies mandate that their employees take some type of training. Twelve of the 18 either use online learning or workshops. One organizes regular live speakers and another provides on-the-job training by fraud departments.

Best practices for the Swiss financial industry are to provide general training programs for all departments and customized, tailored training for high-risk departments that are specifically vulnerable to fraud. One key precondition for enhancing the efficiency of training programs is the inclusion of corporate anti-fraud training as part of the fraud risk management policy. (See Winning the risk game: COSO and the ACFE release new guide on managing fraud risk, by David L. Cotton, CFE, CPA, CGFM; Sandra Johnigan, CFE, CPA/CFF; and Leslye Givarz, Fraud Magazine, January/February 2017.)

The planning of training support and supervision depends on a company’s size and structure. An organization would benefit from integrating its internal training department (apart from the human resources department) into the anti-fraud training program.

Organizations can use a combination of varying content delivery methods and activities such as online learning sessions, workshops, on-the-job training and live speakers. New technological opportunities allow employees to participate via company intranet in roleplaying “fraud games” and fraud case simulations plus watch videos of convicted fraudsters describing their crimes.

Organizations shouldn’t neglect incorporating employee incentives for becoming part of a fraud-aware work force. According to survey respondents, human resource departments in the Swiss financial industry require all employees and executives to sign contracts at their time of hiring stipulating that they’d report potential fraud incidents and that some of them would have to attend anti-fraud training to understand the code of conduct.

Communicate strong tone at the top

The Swiss financial industry recommends tone at the top to promote continuous fraud awareness for internal staff. Supervisory board members and upper and/or top management must be actively involved in training programs to ensure a strong tone for all others at all levels of the company. Organizations can create discussion forums on red flags of fraud to kick off the corporate debate on fraud and foster interest.

It was somewhat surprising that more than the half of our respondents don’t offer tailored anti-fraud training sessions to either the board or the upper or top management. We clearly see potential for improvement in that area.

Some survey findings demonstrate potential measures on how organizations can implement training. Our respondents widely distribute anti-fraud materials, fact sheets and digital reminders containing anti-fraud messages. A couple of companies also conduct survey assessment interviews with their employees.

One of the banks broadcasts monthly anti-fraud messages on its internal television channel and has a quarterly fraud newsletter. Another bank publishes internal news articles and has created an internal anti-phishing campaign. It tested its employees by sending them a suspicious, fake email. If employees opened the email or clicked on links within the mail, they received additional training sessions. (Of course!) Two banks communicate the evaluation results of its training sessions, which creates more competition among employees.

Some financial industry companies emphasize that poor tone at the top affects reputation and profit, which diminishes job security. Other Swiss companies communicate to employees the consequences and sanctions of internal fraud. They show lessons learned from real-life fraud cases.

In a best-case scenario, managers actively encourage employees to share their fraud knowledge with each other.

According to our findings, and in our assessment, too few organizations sufficiently communicate to their employees the numerous advantages of detecting internal fraud as early as possible.

Involve and coordinate persons in charge

According to our respondents, the tightly interlinked coordination among all departments involved in the anti-fraud training development process plays a major role in its success. The training should be synchronized with other anti-fraud controls such as automated fraud detection or whistleblowing hotlines.

The surveyed companies say that it’s a major challenge to involve supervisors in anti-fraud development processes. Some of them say that lack of resources often impedes middle management’s assistance. However, the findings show it is even more problematic to involve top management in training processes. One company complains that employees simply don’t have enough time to efficiently participate in online training courses.

From our perspective, sufficient financial and human resources serve as basic preconditions for all kinds of training. Ultimately, anti-fraud training shouldn’t be a tedious compulsory task and, thus, a burden for the workforce. Supervisors should be able to fulfill their functions as role models for employees. They can take on leadership functions and motivate employees to participate in training programs and influence their attitudes.

In a best-case scenario, managers actively encourage employees to share their fraud knowledge with each other. Seven insurers and five banks surveyed stated they exchange fraud-relevant information with employees who were directly affected by fraud incidents. They told us they use a traditional form of corporate communication: face-to-face meetings.

To ensure broad-scale support for corporate anti-fraud training programs, it’s also necessary to involve responsible persons from various departments, such as risk management, internal auditing, human resources and human development, as well as other specialist areas that — in some way — are linked to corporate training, fraud and company security.

We’ve found that not all companies, of course, employ anti-fraud specialists with training and educational capabilities. Survey results show that organizations can make corporate training more effective by enlisting the support of external advisors who have expertise in fraud examination principles and developing comprehensive or highly specialized anti-fraud training programs. External support helps organizations conduct training programs at a high didactical level. We believe that employee buy-in for training programs is higher once employees have fully understood the overall purpose.

Again, does it pay to invest in anti-fraud training?

Most organizations can incorporate anti-fraud training that’s more than just checking off an item on a required to-do list. We believe that effective, vigorous anti-fraud training can increase profits and enhance trust, which bolters reputations and, in turn, shareholder value.

Experience has shown us that fraud with its accompanying consequences — financial loss, reputational damage, investigations — is a very costly risk. However, corporate anti-fraud training educates employees about these consequences and raises their attentiveness. For example, a whistleblowing system could become fully effective once employees are immediately able to identify red flags and report on suspicious activities. An organization is only as good as its employees. Staff training reduces losses from fraud.

There’s a flip side to the coin. Designing an effective anti-fraud training program is still a demanding task that requires financial and personnel resources. But if organizations neglect rigorous, thoughtful, deliberate planning, anti-fraud training probably won’t be effective, and they will be seeing extra costs and not profits.

Fabia Wenger, M.A. (HSG), a certified teacher in business education, is a risk professional at a bank in Switzerland. Contact if you wish to receive the comprehensive findings of the study cited in this column. Her email address is: fabia_wenger@hotmail.com.
 
Alexander Schuchter, Ph.D., CFE, is an independent speaker and counsels multinational companies on anti-fraud issues (alexander-schuchter.com). He’s also a lecturer at the Universities of St. Gallen (HSG) and at ETH Zurich, where he conducted interviews with fraudsters. His email address is: office@alexander-schuchter.com.

¹The research results are from Fabia Wenger’s thesis study for her Master of Arts Degree in International Affairs and Governance at the University of St. Gallen (HSG).