Canada: Fraud Protection: What's The F Word Costing You?

Fraud – it’s everyone’s business. That dreaded F word is a prevalent crime we can’t afford to ignore. With one in every five businesses victimized in the past year, fraud has become a big threat and a serious ongoing challenge for Canada’s economy.

Even the best organizations are vulnerable to fraud. According to a March 2016 Canadian Federation of Independent Business (CFIB) report, which sheds light on the most common scams and the impact of fraud on small businesses in Canada, 20 per cent of small businesses were victims of fraud over the past year, with an estimated average cost of $6,200. The report states six out of 10 small businesses defrauded in the past year did not recover any of the financial costs incurred. This damage goes beyond financial, extending to losses in productivity, time and business opportunities, in addition to causing significant stress and negatively affecting the organization’s reputation and staff morale. In fact, over half of small business owners who were scammed in the past year agree the non-financial costs were much larger than the fiscal ones incurred.

Lost time (84 per cent), negative emotional impact, such as stress (61 per cent), and negative influence on staff morale (29 per cent), were cited as the top non-financial effects of fraud. With these numbers in mind, fraud is highlighted as a serious problem, as it deprives businesses from investing in resources to grow their business.

There are many known scams, pitches and fraud types, including variations thereof, with new ones invented daily: telemarketing, online, mass marketing, business, email and mail scams, as well as identity theft. Whether you’re an individual, a business owner or staff member, it is imperative to understand fraud is a real and present threat. Having protective measures in place is the best way to fight fraud before it happens.

Fraud risk cannot be eliminated, but putting appropriate screening and control policies in place can diminish it. The Association of Certified Fraud Examiners suggests the following fraud protection practices to identify and effectively manage potentially costly fraud losses:

"Be proactive. Establish and maintain internal controls specifically designed to prevent and detect fraud. Adopt a code of ethics for management and employees. Set a tone at the top that the company will not tolerate any unethical behavior."

"Establish hiring procedures. Every company, regardless of size or industry, can benefit from formal employment guidelines. When hiring staff, conduct thorough background investigations. Check educational, credit and employment history (as allowed by law), as well as references. After hiring, incorporate evaluation of the employee's compliance with company ethics and anti-fraud programs into regular performance reviews."

"Train employees in fraud prevention. Once carefully-screened employees are on the job, they should be trained in fraud prevention. Are employees aware of procedures for reporting suspicious activity by customers or co-workers? Do workers know the warning signs of fraud? Ensure that staff know at least some basic fraud prevention techniques."

"Conduct regular audits. High risk areas, such as financial or inventory departments, are obvious targets for routine audits. Surprise audits of those and all parts of the business are crucial." The ACFE further suggests a fraud prevention check as a way to begin to determine fraud risks and develop a loss prevention strategy.

In order to protect yourself from identity theft, one of Canada’s fastest growing crimes, the Canada Revenue Agency (CRA) suggests the following preventative measures:

  • Keep your access codes, user ID, passwords and PINs secret;
  • Keep your address current with all government departments and agencies;
  • Choose your tax preparer carefully;
  • Get caller ID;
  • Protect your social insurance number;
  • Pay attention to your billing cycle;
  • Shred any unwanted documents;
  • Carry only the ID you need; and
  • Before supporting any charity, find out if it is registered and get more information on how it does business. This can be done through the CRA website at www.cra.gc.ca/charities.

For further protection, the Canadian Radio-Television Telecommunications Commission of the Government of Canada offers the following tips:

  • Never give an unsolicited caller access to your computer;
  • Don’t give out personal information, credit card or account details;
  • Protect your computer;
  • Read online privacy policies; and
  • Register your phone number(s) with the National Do Not Call List. To register, call 1.866.580.3625 or visit www.lnnte-dncl.gc.ca.

Since June 2015, CRA has noted an increase in telephone scams, where the caller claims to be from CRA. It is asking Canadians to beware; these calls could result in identity and financial theft.

The CRA has strong practices to protect the confidentiality of taxpayer information. The confidence and trust that individuals and businesses have in the CRA is a cornerstone of Canada's tax system. For more information about the security of taxpayer information and other examples of fraudulent communications, go to www.cra.gc.ca/security.

To help you identify possible scams, CRA suggests using the following guidelines.

The CRA:

  • Never requests prepaid credit cards;
  • Never asks for information about your passport, health card, or driver's license;
  • Never shares your taxpayer information with another person, unless you have provided the appropriate authorization; and
  • Never leaves personal information on your answering machine or asks you to leave a message containing your personal information on an answering machine.

If you think you have fallen victim to a scam, you have given remote access to your computer to a suspected scammer, or your computer has been hacked:

  • Alert your financial institution. If you have provided your account details to a scammer, contact your bank or financial institution immediately.
  • Get further assistance. Contact the Canadian Identity Theft Support Centre at www.idtheftsupportcentre.org or by dialing 1.866.436.5461.
  • Get qualified computer help. If you are experiencing computer problems, seek help or advice from a qualified and reputable computer technician.
  • File a complaint. You can report unwanted telemarketing calls at www.lnnte-dncl.gc.ca/plt-cmp-eng or by calling 1.866.580.3625.
  • Contact law enforcement. If you think you might be part of a fraud scheme, contact law enforcement authorities or the Canadian Anti-Fraud Centre at 1.888.495.8501.

Following through with policies, preventative measures and guidelines are crucial to preventing fraud. The cost of trying to prevent fraud is less expensive than the cost of trying to recover losses after the crime has been committed.

The following are useful resources for fraud prevention:

The Canadian Anti-Fraud Centre is the central agency in Canada that collects information and criminal intelligence on fraud. Visit their website to read about fraud types, how to protect yourself, or report an incident. http://www.antifraudcentre-centreantifraude.ca/index-eng.htm

The Little Black Book of Scams (Canadian edition), available in PDF version on the Government of Canada website, is your guide to protection against fraud. Click the following link to access the book: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03074.html

Sources:
“Businesses: Take These Five Steps to Combat Fraud.” Association of Certified Fraud Examiners. November 14, 2012. http://www.acfe.com/press-release.aspx?id=4294975785.  
“The Little Black Book of Scams.” Competition Bureau. November 20, 2015. http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03074.html
“Welcome to the CFAC website.” Canadian Anti-Fraud Centre. Last modified October 3, 2016. http://www.antifraudcentre-centreantifraude.ca/index-eng.htm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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