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Are NGOs ill-prepared to tackle fraud?

During these uncertain times many NGOs are ill-prepared to tackle fraud, potentially impacting their ability to achieve their mission. Fraud prevention strategies vary greatly within NGOs and not all is down to size and available resources. An organizational culture of compliance and shared responsibility is essential. NGOs of any size can help protect their operations, reputation and finances against fraud. Learn how you can help protect your NGO from fraud.

Always ready to help your cause, because your cause can’t wait
Always ready to help your cause, because your cause can’t wait

We face fraudsters who, as we know, are more and more creative when it comes to scamming and have no qualms about defrauding victims, even during a pandemic.

As reported by the US Federal Trade Commission, Americans have filed more that 205,000 reports of fraud linked to the coronavirus fraud in 2020 with losses of $145 million USD. Total losses for fraud exceeded $3.3 billion USD1. A rise of approximately 83%. In Canada the Canadian Anti-Fraud Centre reported that identity fraud spiked considerably during the pandemic year of 2020 and the greatest dollar loss was associated with induced frauds. Combined fraud losses totaled $160 million CAD2. When one considers that fewer than 5% of victims actually report fraud the true extent of the issue is very concerning.

In addition to economic damage, which is difficult to measure, there could be a negative impact on an NGO's reputation in the long-term. As donor confidence is essential in helping achieving your mission, being vigilant to potential fraud is essential for NGOs. We’ve put together some simple tips to help you reduce the risk of fraud.

How to identify fraudulent activities?

Ignoring fraud won’t make it go away. It only takes a single case of fraud to cause serious and potentially irreparable damage to your NGO.

Fraud can appear in multiple ways:

  • Invoice diversion
  • Money laundering
  • Corruption
  • Unauthorized fundraising
  • Cyber attacks

Build your fraud framework in 4 key steps

Prevention focuses on the understanding the different types of fraud an NGO can face, who controls it, and how to fight proactively against it. Your prevention plan should include: data analysis, rule management, control management, business requirements and training. Detection means accepting you’re vulnerable despite your positive mission, and acknowledging that training and outreach are vital and effective. Mitigation focuses on placing the right people in the right jobs and ensuring effective communication throughout your organization. Finally, Remediation means that NGOs must adapt and evolve, especially as online fraud activities increase.

NGO Fraud prevention strategies
NGO Fraud prevention strategies

Build your fraud strategy

Fraud mitigation doesn’t require expensive technology. It's about understanding the risk of each type of fraud, your organization’s current limitations, and crafting an appropriate response. The human element of fraud control is key policies, communications, procedures, and building knowledge. NGOs need to accept that problems exist and be proactive instead of waiting until it is too late.

“Mitigating fraud helps you to achieve your mission.”  Alex Beavan, Head of Fraud Investigation, Western Union Business Solutions, London - UK

For further information you can watch our training on demand:

Module 1

 NGO Fraud Strategy

Module 2

Help mitigate the types of fraud impacting NGOs

If you have questions please reach out to us at: ngous@westernunion.com

*This article is provided for informational purposes only and does not provide any financial, legal, accounting or tax advice.

 

More related articles:

https://www.ftc.gov/news-events/press-releases/2021/02/new-data-shows-ftc-received-2-2-million-fraud-reports-consumers 

https://www.antifraudcentre-centreantifraude.ca/features-vedette/2021/frauds-10-fraudes-eng.htm 

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