Corporate treasury departments need a fraud prevention strategy that not only keeps pace, but is one step ahead of the fraudsters. To be truly effective, systems and processes needs to be able to spot fraud as they are developing – not just identify them once they're active.

It is essential to have the proper controls and observe them as the Metropolitan Police survey shows.

Sources of Fraud

Source: Metropolitan Police UK, 2002

Often fraud could be prevented quite easily by having basic controls in place, e.g. GCHQ, the Government Communications HQ, says 80% of all cyberattacks could be dealt with by basic information security measures.

Fraud Control Framework
The corporate treasury department needs to fight fraud at different levels:

• clear description of the overall fraud control policies and how the operational and internal controls within the department and in regional or subsidiary treasuries operate
• payment authority levels for each member of staff
• dual approval for types of payment
• full documentation of all working procedures defining the sequences of actions required to perform each task, the information required and how it flows in the department, and what is recorded, reported and monitored
• full segregation of duties and processes between front, middle and back office or at least segregation between execution, confirmation and settlement
• segregation of accounts and monitoring and reconciling of accounts daily
• full automation of key processes so there is no room for manual intervention and fraud
• full treasury management information on each transactions to ensure any fraud is exposed
• performance targets that do not encourage fraud
• a clear definition of who is responsible for the control framework
• personnel policy that has forced vacations and job rotations
• regular and comprehensive audits of the whole corporate treasury department operation.

Good Habits and Practices
At a much more mundane level, but just as important, it is vital to ensure that basic day-to-day good practices are followed such as not giving passwords and personal information over the phone, and changing passwords regularly. Also looking out for employees who fail to take annual leave, or who work long hours and are reluctant to delegate or share responsibilities, or who have a change in lifestyle - an surprisingly expensive new car, or have a passion for gambling or other expensive habits.

Fighting fraud in the corporate treasury department needs to be a way of life, a culture which is built into the structure and processes of the department.

Most companies also takeout fidelity insurance to protect themselves from losses from fraudulent or dishonest acts by employees.

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