Fraud is a multi-billion dollar a year industry. According to the 2020 Global Study on Occupational Fraud published by the Association of Certified Fraud Examiners, the majority of fraud losses are never recovered by victims. It’s much cheaper to prepare and avoid becoming a victim of fraud than to try to recover from it.
According to the Sonoma County District Attorney’s Consumer Alerts, recent frauds in this area include phone calls or text messages alerting you to a debt you owe, a refund due or a package delivery and then ask for your personal information in order to complete the transaction. These frauds typically increase during the holiday season.
Current local scams
• Unlicensed contractor fraud – common after wildfires and other disasters
• Fraudulent charities and beggars
• Employment scams
• Romance scams
• Grandparent scams
• Wine, food and olive oil scams
Some examples of food fraud include: fraudulent labeling, counterfeiting wine, selling adulterated olive oil, labeling a product organic when it’s not, destroying crops for insurance money, misrepresenting vintage and varietals, where the grapes come from and over or undercounting inventory.
Current COVID/PPP scams
• Fake Clorox and Lysol websites
• Fake clinical trials
• Fake stimulus checks
Fraud comes in many forms: Stealing checks, cash or inventory, paying personal expenses with company funds, padding expense reimbursements, doubling paychecks, overbilling, forging signatures or documents, and stealing trust assets are all commonplace in the Valley.
Fraud is the great equalizer: All ages, genders, and socio-economic groups are affected. Seniors are targeted because of their assets and/or loneliness. Younger adults have a false sense of security about technology and are becoming a large target group for online schemes, such as employment and student loans. Immigrants are targeted because of fear of governmental action and possibly language barriers which can create misunderstanding or confusion.
Nonprofits and churches are targeted because of their lack of financial controls, and small businesses and professionals because accounting is rarely the key skill of the owner.
Sonoma has a big heart, so let’s make sure your money goes where you are expecting it to go. Here are 10 steps for prevention.
1. Keep numbers to yourself: Never give out numbers on the phone. Social Security numbers, PIN numbers, bank account numbers, serial numbers.
2. Get off the lists: Sign up for donotcall.gov to stop calls. optoutprescreen.com and directmail.com/mail_preference/ to stop unwanted direct mailings. Do not answer, or call, write, email, text or message back or give out any personal information. Sign up for Sonoma County Consumer Alerts with the District Attorney’s office and scam alerts from the FTC.
3. Take your time and don’t feel pressured: Scammers will often use “Limited Time Offer,” “Act Now,” “Free Gift if you sign up today!” Take a breath, step back, and ask for more time to review the information with an advisor, or just say a simple “no, thank you.”
4. Delegate but don’t abdicate: Know your volunteers. Trust but verify. Have two people count cash, make deposits, handle ticket sales and raffles. Rotate duties and use a combination of staff and volunteers to oversee each other. Implement strong internal controls to decrease any opportunity for fraud.
5. Get educated: Read all your bank statements. Reconcile your accounts. Open the mail. Dive deep into the finances of your organization. Know what the typical income and expenses are so you can find a deviation from the normal trends, and have a current inventory and value of your assets. Demand transparency from your financial team. Be insured against loss.
6. Accountability: Make a budget and generate timely financial reports which include a variance from actual income and expenses along with a narrative as to why there is a difference. Ask your team for clarification on any details that are unclear.
For Small Businesses
7. Build a solid foundation: It’s your business, but you need support. Assemble a solid team of credentialed professionals who can act as fiduciaries to help you and check on each other – attorney, CPA, financial planner, tax advisor, banker. Have a trusted outsider review, examine, and ask the hard questions if something seems inaccurate.
8. Get strong with security: Generate strong passwords and control access to your electronic files. Do not allow your staff to share their passwords. The business owner should have copies of all passwords as well as administrator level access to all software, especially financial. Use a computer professional to help keep your online information safe. Keep passwords updated constantly because identify theft is commonplace. Subscribe to a reporting agency that will alert you to account changes and recent security breaches.
9. Holiday time: Make sure all accounting and finance staff take vacations, and be nosy while they’re out. Cross train employees, or bring in temp workers. Many frauds are uncovered by a new set of eyes on the books.
10. Help the next person: Fraud happens to everyone, young or not, wealthy or not, it is not a sign of incompetence or a personal failure. Don’t be embarrassed to discuss it with your trusted advisors if fraud has already happened. Help your relatives, neighbors, and friends and do your part to stop it from happening again. Call the police and file a report. Law enforcement will take your information and refer the case to the appropriate department.
Aho Financial Forensics is a local sponsor of International Fraud Awareness Week, which runs from Nov. 15-21. The Ahos have been Certified Fraud Examiners in Sonoma Valley since 2007 and consider every week to be Fraud Awareness Week. 780 w. Napa St.