Pub. 4 2014 Issue 3

11 How can you protect your dealership? Putting in anti-fraud controls has a significant effect. It reduces potential losses and shortens the length of duration for the fraud. Just trying to stop fraud, in other words, is enough to make fraud less expensive and to shut it down more quickly. What are some specific anti-fraud controls? • Set a good example. The behavior of people at the top is copied by everyone else. If you’ve ever seen the difference caused by two very different people managing exactly the same people, you know this already. A good example does make a difference. • Train people so they know what the warning signs are. If you or someone else sees a warning sign that might indicate fraud, don’t make hasty assumptions. Look at it more as a reason to examine the situation a little more thoroughly. • Rotate jobs and have mandatory vacation policies. • Put in a tip line, and then advertise it on a regular and frequent basis. It will probably cost you something between $500 and $2000 per year, which is a bargain compared to what you could potentially lose. • Even though management reviews and a combination of internal and external audits are not as effective as having a tip line, that doesn’t mean they are worthless. Make sure reviews and audits are a regular part of dealership life. Since approximately 40 percent of all fraud cases are detected because someone gave a tip, that makes it at least twice as effective as any other method; the frauds uncovered through a tip line are 41 percent less expensive to the business as frauds uncovered by different methods, and the tips mean fraud detection takes place 50 percent faster than would be the case otherwise. Almost 50 percent of those tips come from employees, so don’t just put up a poster in the lunch room. Actively talk about your tip line with employees and vendors who work with your dealership. Make the tip line part of new-employee and new- vendor orientation. Can you prevent fraud by screening employees carefully? Unfortunately, the answer to that question is a strong “no.” Most people who commit fraud are first-time offenders, and many of them have worked for a particular employer for years before be- ginning to steal. It’s more helpful to rely on employee monitor- ing, the presence of risk factors, and the warning signs than it is to rely on screening. Ninety-two percent of the time, fraud is preceded by at least one behavioral trait that indicates potential trouble. In 64 percent of the cases, there were multiple indicators. What should you be looking for? The following list, compiled for the 2014 Report to the Nations on Occupational Fraud and Abuse, identifies what to watch for, and includes the most recent percentages of perpe- trators who demonstrate the behavior: • Someone living more lavishly than seems reasonable (43.8 percent) • Financial problems (33 percent) • A particularly close relationship with a vendor or customer (21.8 percent) • Control issues and an unwillingness to share job duties (21.1 percent) • A “wheeler-dealer” attitude (18.4 percent) • Marriage problems, divorce, or other problems at home (16.8 percent) • Bad temper, suspiciousness, or defensive behavior (15 percent) • Addiction issues (11.6 percent) • Complaints about not being paid enough (9.4 percent) • Previous problems with employment (8.9 percent) • A refusal to take a vacation (8.6 percent) • A pressured work environment (8.4 percent) • Social isolation (7.4 percent) • One or more complaints about not having enough authority (6.5 percent) • Pressure from family or peers who want an employee to succeed (6 percent) • Unstable life circumstances (5.9 percent) • Previous legal problems (5.6 percent) You can’t stop people from making bad decisions that could do substantial damage to your dealership, but you can do a lot to improve your chances of detecting problems and putting a prompt end to any theft that might take place. In a still-uncertain economy, that is good news for any business.  Protect your business and reduce your risk of violating regulations with LAW® F&I Compliance Documents from Reynolds Document Services. © 2014 The Reynolds and Reynolds Company. All rights reserved. Printed in the U.S.A. 6/14 » Standard Forms » Common Defenses » Managed Risk » Streamlined Processes To learn more about LAW Universal Document Solutions, contact your local Reynolds Document Services Consultant, call 800.344.0996 , or email ids_mktg@reyrey.com . ® The Brand You Can Trust