Fraud Detection Methods Crucial for Jamaica Businesses to Prosper
Introduction
A recent study has highlighted the importance of fraud detection methods in Jamaica, where poor governance structures and systems can pave the way for fraud and weaken an entity’s potential.
What is Fraud?
According to experts, fraud is the intentional use of deceit, trick or dishonest means to deprive a person or organisation of his/her or its money, property or legal right. The study found that there are usually three elements involved in fraudulent activities:
- An incentive or pressure to commit fraud
- A perceived opportunity to commit fraud
- The ability to rationalise the fraudulent action
Perceived Opportunities to Commit Fraud
The study revealed that perceived opportunities to commit fraud often involve weaknesses in processes or procedures to protect assets from loss, technical skill or ability to commit the fraud, and a low risk of detection. Entities with poor governance structures and systems are more likely to experience fraud, which can have devastating effects on reputation and business.
Importance of Effective Fraud Detection Methods
In Jamaica, where charities and non-governmental organisations (NGOs) are also vulnerable to fraud, it is crucial for these entities to put in place effective fraud detection methods to prevent and detect fraudulent activities. The study found that 23.2% of reported cases involved losses of at least USD$1 million, with a median duration of 18 months.
Categories of Occupational Fraud
The Jamaica Association of Certified Fraud Examiners (JACFE) has identified three primary categories of occupational fraud:
- Asset misappropriations
- Corruption
- Financial statement fraud
The study found that asset misappropriations occurred in 83% of cases, with a median loss of USD$125,000. Financial statement fraud was reported in 10% of cases, but had the greatest financial impact, with a median loss of USD$975 million.
Relying on External Audits is Insufficient
Experts warn that relying solely on external audits to detect fraud is insufficient and can lead to devastating consequences. Instead, proactive anti-fraud controls and detection methods, such as:
- Independent review and monitoring of systems
- Inspection of assets
- Cash counts and point-of-sale reconciliations
are crucial in reducing the risk of fraud and fraud losses.
Solutions for Jamaican Businesses
AMCS Jamaica Limited, a leading provider of fraud prevention and detection services, assists entities with designing, implementing and monitoring systems to reduce the risk of fraud and fraud losses. The company also provides fraud investigation services to help organisations respond effectively to fraudulent activities.
Conclusion
In light of these findings, it is essential for Jamaican businesses, charities and NGOs to prioritise fraud detection methods to protect their assets and reputation. By doing so, they can ensure sustainable growth and prosperity in the face of increasing fraud risks.