Handling Fraud & Abuse Within a Business

The largest loss of cash to businesses occurring in 2008 for US businesses was due to check tampering, according to a study done by the Association of Certified Fraud. Fraud in its broadest scope, is any act that is used to intentionally mislead another person or business into unauthorized gain for the initiating party. Abuse is any act that is done openly, but not in conjunction with company practices, policies or lawful rules.

Declare Definitions
Companies should define and write down the definitions of the different types of fraud and abuse that exist. Fraud in inception is when a person signs something but doesn't realize what she is signing. Fraud in inducement is where the person knows what she is signing but is under the impression she is signing it for different reasons than what is really intended. Fraud by concealment is specifically lying about enhancements, repairs or services performed to a potential buyer. Further, non-disclosure of important details that result in serious injury or loss in some states can be considered fraud.

Declare Examples
Someone handing a college professor a note to sign but not showing the professor the entire terms of the note can be considered fraud. Double billing on purpose from time to time is considered abuse. Double billing all the time is considered fraud. Billing for services not rendered or billing insurance companies for people that do not exist is fraud. Consistently waiving patient office co-pays is another form of abuse. Employees reselling company products for their own personal gain is another form of fraud. Tampering with checks, forging documents and falsifying documents also fall into this category.

Detection
Companies should set up employee hotlines that allow the employees to make anonymous tips to the company's human resource of fraud department. These hotlines should be provided to the employees with instructions on how to use the hotline and under what circumstances. Employees should have the option of writing anonymous letters or be protected under applicable human resources laws and regulations if the person makes the report through the human resources division.

Declaration of Laws
Policy and procedure documentation and trainings should include the local state and federal laws the fraud and abuse procedures are based on. They should be written word for word and read aloud during employee trainings. Consequences to the laws that are provided at a state and federal level should be noted and informed. Company consequences such as being written up, salary freezes, recovering of financial damages or employment termination should be mentioned.

References:

Association of Certified Fraud Examiners, 2008 Report to the Nation on Occupational Fraud and Abuse, ACFE.com
Neighborhood Health Providers,Neighborhood Health Providers Fraud and Abuse Policy, GetNHP.com
Henry R. Cheesman, "Contemporary Business and Online Commerce Law, Fifth Edition"; 2006