We keep hearing about a lot of frauds that keep happening. The influence is so strong that we tend to distrust the world around us, people we interact with and work with. The perfect balance is acquired when a logical and strong approach is taken towards preventing frauds from occurring and at the same time not be too conservative show stopper. This write-up is a pointer to people who would want to make a difference by preventing frauds without being distrustful or sceptic.

1. Ever since I have been introduced to the concept of Fraud Prevention, one of the
first questions that I had and have been asked whenever I go for trainings,
which over the course of time, have arrived at answers to - Where do I start
looking for fraudsters and which of the following would be my start point :
(a) All are fraudsters...trust nobody... validate everything (OR)
(b) Identify key vulnerable process loopholes ........ lay your trap (OR)
(c) Study the environment, people, processes ...... (OR)
(d) Map people by positions and calculate that you will look for lapses only
for certain portions of the hierarchy.
Trust me this is a very difficult question to answer and there is no single right
answer. It varies based on experiences. Yet I seek to answer on personal
experiences.
I prefer to start with the TRUTH BIAS principle - What we are told is true and
that what we see is real. ( Quote by Pamela Meyer). We go by the fact that all
humans are and will be truthful as we are wired that way unless some external
factors force us to change the wiring.
What we need to do is build reference points. The first thing to be done before
you determine the scope of your fraud prevention measure is to define your
metrics and ascertain where you want things to be. The deviation from this
reference point will help you determine your next step.
It is always preferable to go along the flow of things / processes / functions
rather than have a rigid set of actionable. I remember Bruce Dorris (Program
Director, ACFE) explaining - the way you frame your questions would
determine your success rate - in the context of investigations. I hold this theory
true even for regular day-to-day work mapping. It is always good to start with a
certain hypothesis. From the reference point deviations, think through and
logically, at a thought level, extend to the possible end point. Take up one end
point with critical impact and presume that its occurrence is certain. Tag and
flag reference points. At every stage during the course of your work look
towards the nearest reference flag. If you do not sight the flag anywhere near, it
simply means that you need to get back to the drawing board to rework your
hypothesis. This is time consuming, yet effective.
Over the years, I have also gained insight that each person has truth biases about
others. They will not believe a person did wrong unless you show them
something concrete to the effect - seeing is believing - is also part of the truth
bias principle. So unless you can prove your hypothesis with evidence, it will

2. never have desired effect. So peg your path with TEEs. Each TEE will mark
successful completion with evidence.
Bruce Dorris used to give an example, about multiple people being part of the
fraud prevention. The larger the group the better is your control.
Let's say you need $ 100 badly.... There is very high pressure, and you tell
yourself - "Its only temporary while, I don't think it's a sin to procure this money
by any means", and spot that $ 100 is kept in the open. You will grab the
opportunity and pocket it.
However, if you knew that 10 people from various angles are watching that note
and are looking to find who would pick that note, you would think 10 times
before approaching the $100 note.
It is important to be driving the awareness of lapses / deviations from reference
points, and create a general awareness amongst all that everybody is being
watched. It would touch the ethical side of people and make it harder to
rationalize. It would bring down the number of instances that a deviation occurs.
So a good start would be to
(a) Mark the targets, define and spread the message of its existence.
(b) Look at exception handling - Deal with deviations from process item by
item. It is better than taking up entire process and looking for flaws.
Allow deviations to announce itself to you.
(c) In reviewing exceptions, create a hypothesis, and do a Root Cause
Analysis.
(d) Create changes in your control mechanisms, and tighten your controls.
(e) Create Awareness amongst everybody working with you through training
them on DOs and DONTs. Measure its effectiveness - this is very
important. Doing a training for the sake of activity or merely passing
mails without touch base to reality is futile.
(f) Peg TEEs of progress and establish patterns for future use.
It is my firm belief that if we tread on the TRUTH BIAS principle with a ROOT
CAUSE ANALYSIS kind of mindset, where you unravel, and explore why
things went wrong, you would get better answers than proceeding with a
presumption that everything, everywhere is wrong and would need to be
frisked.