Across the past 30 years, governments all over the world have grown more concerned about financial crime. Because the effects of financial crime vary depending on the environment, there are many different factors that give rise to this worry. For instance, using insider information for personal gain or deceitfully acquiring another person’s property will always be done with the goal of obtaining a material profit. As an alternative, one may use deception to obtain material gain for another.
Financial crime is an issue that all financial businesses need to take seriously for financial, practical, and even moral reasons. Negative actors continue to adapt despite attempts by regulators and authorities to continuously expand their strategies to combat financial crime, which results in increasingly advanced threats and attacks in the fields of money laundering, financing of terrorism, and general fraud. Furthermore, even the most savvy and well-intentioned regulators sometimes lag criminals because, despite regulators’ best efforts, they can often adapt to the always changing world of financial crime even faster.
Some of the most common types of business fraud people fall for are not limited to:
Payroll Fraud:
Payroll fraud can take many different forms, such as lying about the number of hours worked, not repaying pay advances, providing unauthorized bonuses, increasing pay rates without authorization, establishing “ghost” employees, and more. Someone who already has access to your payroll system or who manages to do so will steal money by disguising it as payment for services rendered. Payroll fraud is virtually always electronic, so make sure the necessary cybersecurity precautions are taken to stop it. Small firms experience this form of commercial fraud twice as frequently as larger corporations.
Data Theft / Identity Theft:
Data theft occurs when a coworker obtains your customer list, credit card numbers, or other personal or company information and illegally utilizes it for monetary advantage. Identity theft can cost your company thousands of dollars or more, so keep all paper documents in locked cabinets and password protect all digital information.
Financial Statement Fraud:
Financial statement fraud is the practice of falsifying financial records to make one’s assets or net worth appear higher and one’s obligations or debts appear lower in order to facilitate other financial activities, such as obtaining a loan. The intentional misrepresenting of a company’s financial status through false statements and/or omissions to deceive others is known as financial statement fraud.
Asset Misappropriation:
Asset Misappropriation or check fraud happens when a signer who is authorized to sign the check forges it or when a signer who is authorized to sign the check makes the check payable to themselves. This type of employee fraud happens the most often since it can be the easiest to commit. Employees either steal money from a company account or non-cash assets like office supplies or equipment without permission. Regularly balancing your entire financial records and inventory accounts is the simplest way to stop this type of corporate fraud.
Tax Fraud:
This sort of company fraud, also known as income tax fraud, entails intentional actions intended to circumvent tax regulations and/or to defraud the Inland Revenue Authority of Singapore or similar regulatory tax authorities overseas (IRAS). When a company or individual doesn’t pay the taxes they owe or doesn’t submit a tax return on time, this happens. Another instance of tax fraud is when a person or organization fabricates data on a tax return in order to reduce their tax liability. Which is much more common than you think even with stringent law on tax evasion and fraud right here in Singapore
How KYC Due Diligence reduces the risk of fraud
Your KYC Due Diligence and third-party risk management processes should be able to withstand the sophisticated criminals of the future and evolve accordingly to help ensure that your organization is not impacted by organized criminal networks. Enterprises are the subject of a wide variety of scams, when con artists utilize purposefully deceptive sales tactics to convince businesses to part with their money. Scams that are frequently encountered include those involving publication, advertising, and directories, needless services, unsolicited goods, advance-fee fraud, and investment scams. Scammers employ identical methods regardless of the scam they are engaging in or the type of victim they are trying to con. A company can reduce the likelihood that it will fall victim to a scam by being aware of the common business scams and the scammers’ methods.
Knowing what to look for is essential to any preventive endeavor, especially considering how frequently and in what forms fraud occurs within firms. Even while many of these schemes only take a little portion of the assets of a company, these tiny sums can add up to significant losses. As Benjamin Franklin famously said, “An ounce of preventive is worth a pound of cure,” knowledge is the first step in prevention. One “ounce” of prevention can avoid “pounds” of lost assets if your firm has an extensive system of checks and balances in place wherever money is handled. Businesses can avoid major hassles by learning about fraud and taking action by engaging with third party risk management tools such as Refinitv or Intellinz to prevent it.
