Business, TECH

Why Every Business Needs a Fraud Prevention Checklist

Maintaining an effective checklist can help your business prevent fraud. Ensure you communicate security awareness and antifraud policies to employees, require key accounting personnel to rotate vacation and job duties, and regularly perform a physical inventory of inventory and fixed assets. The most common forms of occupational fraud include asset misappropriation (check tampering and billing schemes), payroll fraud, expense reimbursements and financial statement fraud. In addition, a fraud hotline or suggestion box can help deter fraudulent activity and may lead to more timely detection of fraud.


A fraud checkup is a good way to assess whether your business has the controls to prevent and detect fraud. This is true regardless of what you sell or where you do business, as fraudsters will always seek opportunities. It doesn’t matter if you sell e-commerce goods, SaaS software, travel services or even pet food: as long as credit cards or other forms of electronic payment are accepted on your website, there is a risk that fraud will be committed. Moreover, fraudsters do not discriminate between high-value items and low-value goods. Low-value products are often used to test stolen credit card numbers and the limits of the fraudulent card. Another area where fraud prevention is critical is within the organization itself. Employees are known to be a common source of fraud, with the Association of Certified Fraud Examiners’ “Report to the Nation on Occupational Fraud and Abuse” showing that the typical organization loses about 5 percent of its annual revenue to internal theft. Educating employees on what constitutes fraud and providing regular training is an effective deterrent. Also, having strict policies communicated to all employees can reduce the risk of fraud. Lastly, maintaining accurate accounting records by reconciling bank and other control accounts every month and reviewing financial reports every quarter is crucial.


Fraud detection is critical to stopping criminal activity, protecting businesses and consumers from financial losses. This includes credit card fraud, identity theft, account takeover and phishing scams, among other threats.

A robust fraud prevention strategy should include the ability to detect suspicious transactions and alert teams with real-time notifications when suspicious patterns are detected. This will allow them to act quickly and stop the crime before it becomes a bigger problem. Many types of fraud can be seen through machine learning, including predictive analytics, regression analysis and exception-based reporting (EBR). EBR is a strategy used in loss prevention and operations management (among others) to identify anomalies in everyday operations. All of these techniques analyze a dataset and identify relationships between variables, which can help predict whether a transaction is fraudulent. A good detection process should also include document verification to ensure that documents are authentic and not manipulated. This can consist of checking that a driver’s license or passport is legitimate, that a business address on a bank statement matches that of the customer and that a signature is valid. A strong fraud detection system should also include the ability to flag potentially fraudulent activities based on how customers behave online. For example, if multiple transactions are made within a short period, or customers often log in from unfamiliar devices or locations, this could indicate fraud. A system that tracks user behavior and uses device fingerprinting, data enrichment, and reverse media lookup can help flag this activity.


As a company, you must ensure your fraud prevention measures are working. Suppose your team needs to catch more tricks cybercriminals use to access your business, such as phishing emails or social engineering attempts. In that case, it is time to review and enhance your security measures. Regarding data, remediation is cleaning up information that a breach or other event has compromised. As part of a comprehensive remediation process, the security team must understand what, where and how much information is stored in an organization. This discovery is necessary because it helps the team determine which data needs specialized storage and which does not.


Despite the well-documented fraud costs, many large and small businesses neglect to implement or review a systematic fraud prevention program. This leaves them vulnerable to avoidable financial loss and reputational damage. A fraud prevention checklist helps companies test their security measures and identify gaps in their defenses that a fraudster can easily exploit. Regardless of how a business is breached, detecting and reporting it quickly is the key to recovering from a fraud incident. Doing so enables law enforcement, regulators and government agencies to take action and impose consequences on the perpetrator. In addition, a prompt response also provides the opportunity to recover some of the stolen funds through civil and criminal proceedings. The best way to detect fraud is through proactive risk management and vigilance in reviewing suspicious transactions. Some of the more common fraudulent red flags include unreconciled cash payments, a shrinking inventory despite a steady sales increase, an increasing number of credit card charges that don’t match invoices or a 3-way match, unauthorized purchase orders, bogus employee reimbursements and other anomalies.

Fraud prevention and detection practices that can help companies of all sizes minimize their risk of fraud include a monthly independent review of bank statements by someone outside of the accounting department, separating duties among different people (receiving invoices/payment requests, recording payment information, creating/signing checks), implementing a hotline and other mechanisms for employees to report suspicious activity and rotating responsibilities.