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How to Prevent Workplace Corruption and Collusion? Think Like a Financial Fraud Investigator

Kelly J. Todd
Managing Member
August 26, 2020

When financial fraud investigators discuss corruption in the workplace, they are usually referring to a single employee who is exploiting their position for personal benefit.

Collusion, however, involves multiple people working together to abuse their power. When a collision occurs, the damage to a company’s finances and reputation multiplies. And pinpointing the perpetrators and the extent of their wrongdoing can be far more difficult than in the case of one corrupt worker acting alone.

Though tough to spot, workers involved in corruption and collusion often leave a trail of financial breadcrumbs that savvy employers can spot if they are proactively monitoring their enterprise. Employers can also take a few steps to prevent corruption and collusion before it devastates their companies.

Monitoring Behavior

Financial schemes are tough to weed out because corrupt and colluding employees rarely ever record their financial schemes on a company’s books. That said, employers can and should enact a monitoring system that allows them to pick up on signals of corruption and collusion that can appear in the purchasing and disbursement process. They should look closely at:

1) Preset Limits. Be sure to examine preset limits, because they can deliver a treasure trove of corruption signals. In a recent case, FSS investigated, an organization set its transfer approval limit set at $50,000. Investigating a potential fraud, we analyzed transfers at $49,999. Doing so revealed 48 instances within a 60-day period of transfers a mere $1 below the approval limit.

2) Consecutive Vendor Invoice Numbers. In another investigation, we identified that 99.9% of all invoices submitted by a vendor were just below the preset limit requiring a purchase order. The vendor submitted hundreds of consecutively numbered invoices each day for purchases by the same department for similar parts. This was done to circumvent the requirement for a purchase order and supervisory approval.

3) Behavior. Pay attention to attitudinal characteristics common among perpetrators of workplace fraud. These include consistent unhappiness with their position, habitually circumventing established policies, and refusing to share tasks or information with coworkers or management. These indications—although not proof of fraud—could point toward the existence of corruption or collusion in the workplace.

Preventative Measures

Employers can and should take preemptive steps to prevent corruption and collusion from occurring or to mitigate damages from an existing fraud. Steps include:

1) Training. Employers should require ongoing fraud training for all employees so they can better understand warning signs and become effective whistleblowers within the organization. Training can be held via a number of methods, including digital videos, live sessions, or interactive self-study.

2) Creating a Safe Environment. Management should prioritize creating an environment that promotes ethical behavior, where the staff is comfortable declaring in writing any potential, perceived, or actual conflicts. Everyone should feel that it is safe to be transparent when reporting relationships and positions that could cause a conflict.

3) Educating Management. Management must be educated on the procedures for handling potential corruption and collusion cases. The moment after a problem is discovered is not the time to develop procedures. Rather, management should be implementing procedures already put into place. Make sure that leadership in your organization is properly educated by offering additional reading, learning opportunities, and courses on fraud.

Although the possibility of corruption and collusion in your company can be daunting, there are ways to combat the threat. If leadership is sensitive to the warning signs of wrongdoing and actively works to create a culture of prevention, the likelihood of corruption and collusion will drastically diminish.

Contact us to learn more about FSS and its financial fraud investigation capabilities.

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