Page 13 - Risk Management Bulletin Jan- Mar 2021

RMAI BULLETIN JANUARY TO MARCH 2021

B) Insurance Fraud Controls through Fraud Y Internal controls to minimize fraud should, where
Prevention: possible, address fraud red flags.
Y Wherever new internal control procedures are
announced, they should be documented clearly
and simply. Internal controls should be frequently
revised as part of the risk management process,
and there should be continual improvement of
controls.
Fig. 5 - Fraud Controls through Fraud Prevention
Y Ultimately, the internal control system should be
embedded within the culture and operations of an
How to Establish a Sound Ethical organization.

Culture in any Organization:
Let us understand weak internal controls with a help
Y A mission statement that refers to quality or, more of a case study:
unusually, to ethics and defines how the
organization wants to be regarded externally.
Case is of no process of Pre-Employment
Y Clear policy declarations on business ethics and
Screening in a company
anti-fraud, with clarifications about tolerable
Y A finance house needed an extra junior
behavior in risk prone situations.
accountant for a short period of time. The
Y A method through which supposed fraud can be company went to a reputable agency and
informed. employed an appropriately qualified person.
Y An extensive audit procedure which focuses on Y The company relied on the agency's screening
areas of risk. policy which had failed to uncover a series of

Y Organization who are seen to be dedicated discrepancies in the accountant's personal history,
through their actions. including a false address. The accountant removed
a company chequebook from his work place and
Y A code of ethics or an anti-fraud policy is not
used it to make a series of high value purchases
adequate to prevent fraud though. Ethical
on his own behalf.
behavior needs to be rooted within the culture of
an organization. Y The matter came to light when a routine enquiry
was made with the finance house to verify the
Y To demonstrate commitment, resources should be
issue of one of the cheques. By this time the short-
allocated to communicating ethics and values to term accountant had left the organisation. He
all employees, suppliers and business partners,
and providing training programs where necessary. could not be traced and the matter was referred
to the police.
Y Promise from senior management and 'attitude at
the top' is key. C) Insurance Fraud Controls through Fraud
Detection:
How to establish a Sound Internal
Control Systems in any Organization:

Y An internal control system includes all those
policies and procedures that taken together,
support an organization's effective and efficient
operation.
Fig. 6 - Fraud Controls through Fraud Detection
Y Internal controls typically deal with factors such as
approval and authorization processes, access
restrictions and transaction controls, account Fraud Indicators: Warning Signs
reconciliations, and physical security. Y It is unlikely to eradicate all fraud.

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