In recent news, a former Facebook employee, [Furlow-Smiles], was sentenced to five years in jail for orchestrating a sophisticated fraud scheme that cost the company millions of dollars. This case highlights the importance of having a strong compliance program and the vital role compliance professionals play in preventing and detecting employee fraud.
The scheme operated in two ways. First, [Furlow-Smiles] linked her personal payment accounts to Facebook credit cards and used them to pay associates for goods and services that were never provided to the company. She then submitted fraudulent expense reports to conceal the bogus charges. Second, she onboarded vendors owned by friends and associates, approved contracts and inflated invoices, and directed them to kick back a portion of the payments to her.
This case raises the question: How could a compliance professional have helped Facebook prevent this theft?
- Implementing robust internal controls: Compliance professionals can help design and implement strong internal controls, such as segregation of duties, multi-level approvals, and regular audits of expense reports and vendor contracts. These controls can help prevent a single employee from having excessive control over financial transactions and detect any suspicious activities.
- Conducting due diligence on vendors: Before onboarding new vendors, compliance professionals can conduct thorough background checks, verify their legitimacy, and ensure that they have a proven track record of delivering goods and services. This can help prevent the onboarding of fraudulent vendors and reduce the risk of kickback schemes.
- Monitoring employee behavior: Compliance professionals can help establish a system to monitor employee behavior, including their financial transactions, expense reports, and interactions with vendors. Unusual patterns or activities can be flagged for further investigation, helping to detect and prevent fraud early on.
- Providing training and awareness: Regular training and awareness programs can help employees understand the company’s policies, the consequences of fraudulent activities, and how to report any suspicious behavior. Compliance professionals can lead these programs and foster a culture of integrity and accountability within the organization.
- Encouraging whistleblowing: Compliance professionals can help establish a robust whistleblowing program that encourages employees to report any suspected fraudulent activities without fear of retaliation. This can be a powerful tool in detecting and preventing fraud, as employees are often the first to notice any suspicious behavior.
The case of [Furlow-Smiles] serves as a stark reminder of the importance of having a strong compliance program and the critical role compliance professionals play in preventing and detecting employee fraud. By implementing robust internal controls, conducting due diligence on vendors, monitoring employee behavior, providing training and awareness, and encouraging whistleblowing, compliance professionals can help organizations protect their assets and reputation from the damaging effects of employee fraud.
