Is your business at risk of becoming a repeated victim of fraud?

Where are businesses falling short?

MNP recently surveyed Quebec business leaders to identify the gaps between fraud risk perceptions and reality — and uncovered several areas where businesses are falling short on preventing fraud risks. Some of the most concerning findings revealed by the survey include:

Overlooking the economic environment

Sixty percent of survey respondents do not believe that the current economic environment changed or reduced the risk of fraud. However, factors such as inflation, high interest rates, tariff uncertainty, and labour shortages all increase the risk of fraud.

Inflation and high interest rates add to the pressure to commit fraud, and disruptions caused by changes to the economic environment provide new opportunities for fraud to occur. Additionally, businesses eager to hire more workers during a labour shortage often overlook crucial fraud prevention measures such as performing background checks on potential employees.

Uncertainty about whether fraud has occurred

Ten percent of survey respondents report that they do not know if their business has been a victim of financial fraud. An additional 13state that they do not know if their business has been impacted by financial fraud — but suspect fraud occurred or could be occurring.

This means that the fraud may be continuing undetected, and longer durations lead to more sizeable financial losses. According to the Association of Certified Fraud Examiners (ACFE)’s 2024 frauds detected within the first six months had a median loss of US$30,000. Cases that went undetected for between two and three years had a median loss of US$250,000.

Repeat victims of fraud

Fifteen percent of survey respondents impacted by fraud report they were victims five times or more. According to the findings of the ACFE, fraud causes a median loss of US$145,000 per case. This adds up to significant financial losses for a business experiencing repeated incidents of fraud — and indicates that many victims are not implementing the correct measures to prevent fraud after the first case occurs.

How to prevent fraud risks in your business

These findings from the survey are alarming — and it is critical to take action to prevent fraud risks in your business. These three steps can help you get started:

Mitigate economic risks

Changes in the economic environment create both pressure and opportunity for fraud to occur. However, many business leaders are looking in other directions during periods of disruption and focusing on more visible risks — such as hiring new talent quickly to address labour shortages.

It is important to be vigilant during times of disruption and watch for red flags that indicate fraud may be occurring in your business. This includes employees who never take vacation or who have an unusually close relationship with vendors or customers. Additionally, it is crucial not to overlook background checks when hiring new employees. Another MNP study found that 16 percent of fraudsters who were in a position of trust were repeat offenders, and a background check prior to hiring could have revealed this issue.

Take action immediately

It is important to take action immediately when you suspect fraud may be occurring in your business. More than one in 10 survey respondents are not sure whether their business has been a victim — but suspect fraud has occurred. This can lead to escalating financial losses as the fraud continues undetected for longer periods of time.

Hiring external support to investigate your suspicions of fraud can help you determine whether your organization has been impacted. Additionally, working with external advisors to develop an anti-fraud plan, perform a fraud risk assessment, and provide anti-fraud training are proactive steps that can help your business take action quickly when suspicions of fraud arise.  

Implement stronger measures

Survey respondents reported that their business experienced financial fraud three times on average, and a worrisome 15 percent of impacted respondents were victims five times or more. This indicates that many businesses are not taking the right steps to prevent future incidents after fraud was uncovered in their business.

According to our survey, employee dismissal, a complaint to the police, and legal proceedings were the most common measures taken after a fraud was discovered. However, these measures are less likely to be effective in preventing future fraud incidents without additional employee training or an updated fraud risk assessment, which can help strengthen the measures already in place. Additionally, developing an alert process can help empower employees to report their concerns and sets the tone from the top that fraud will not be tolerated within your business.

Take the next steps

It is crucial to take action when you identify the red flags of fraud within your business to prevent financial and reputational damages. Contacting a forensic accountant when irregularities, potential red flags, or suspicions of wrongdoing arise can help you get the answers you need to determine whether fraud has occurred.

Discover more insights in our whitepaper Misconceptions about fraud risk pose significant threats to Quebec businesses. This report analyzes the results of our survey — and provides insights and tips from our Forensics and Litigation Support Services team to help reduce risks to your business.