Fraud prevention strategies and considerations for the non-profit sector

As sectors across Alberta evolve at a rapidly changing pace to address disruption, perhaps one crucial factor many organizations have not had the time to focus on is activity around fraud, and the approaches many fraud actors are taking to capitalize on vulnerability, especially within the non-profit sector.

Aisha Kitchlew, Senior Manager of Fraud Investigations and Cybercrime with ATB provides insight into fraud tactics that the non-profit sector should be aware of and strategies to prevent fraud from happening.

Topics covered in this webinar include:

• Major types of fraud present in the non-profit sector
• Identify who commits fraud
• Outline what you may want to protect and what you can do to protect your organization
• Financial internal control techniques
• Top three fraud types that we are seeing today with examples and how to detect, and how to protect your organization while working from home

Key takeaways

Major types of fraud present in the non-profit sector

Financial statement fraud, which is deliberate falsification of an entity’s financial statements.

Corruption is when influence is inappropriately used in a transaction related to the organization, such as bribes, rewards, extortion, and conflicts of interest. 
Asset misappropriation is when the assets of an organization are stolen or misused, such as skimming, fraudulent payments and payroll fraud. 

Who commits fraud?

Remember anyone can commit fraud, however, it is often those you least expect, in high positions of authority who are trusted and not questioned or audited.

“Basically, [it’s] any employee who has the ability to conduct transactions without transparency,” says Kitchlew.

What you can do to protect your organization

Identify and manage specific financial risks. This could include strategic risks, operational risks, financial risks, people risks, regulatory and governance risks. 
Get the right people with the right skills. “This is the single most effective internal control to reduce financial risk. Improving the quality of the board can really improve accountability and lessen fraud within your organization,” says Kitchlew.

Implement financial internal control techniques. “Internal controls are important to put in place within any organization because they serve as a first line of defense in safeguarding your assets and detecting and preventing errors, fraud, and all types of other risks,” says Kitchlew. “Each non-profit is very unique [with] unique sets of risks, which will be based on your operations as well as the resources that are available and affordable [to that] organization.”

Top three fraud types that we are seeing today

Cheque payment fraud. This is the most common method of payment fraud and includes the use of counterfeit cheques, materially altered cheques, and lost or stolen cheques.

Business email compromise (BEC). When a fraud actor hacks into an organization’s email account and impersonates the real owner of that email address with the intention of defrauding the organization, its clients, partners or employees. 

Phishing and malware. These are harmful programs that can damage your computer, network, or server through viruses, Trojans and worms. “Phishing campaigns are almost always based on ongoing or current events. For example, these days fraud actors will have emails that claim to offer treatments or cures for the coronavirus,” says Kitchlew. 

How to protect your non-profit organization from fraud

Educate your team(s) on fraud techniques because it will help them detect the red flags and report them quickly. 
Offer annual fraud training so everyone is aware of current trends. “Inject a healthy dose of paranoia into your people so they are thinking twice before clicking on any links or providing details to third-parties,” says Kitchlew. 
Force the use of multi-factor authentication within your organization.