According to research, how do employees contribute to the detection of fraud?

Employees play a crucial role in the detection of fraud by reporting suspicious activity. This proactive approach is essential because front-line workers often have the most direct insight into the everyday operations and anomalies within a business. They are typically the first to notice irregularities or behaviors that deviate from the norm, such as discrepancies in financial records, unusual interactions with clients or vendors, or other red flags that may indicate fraudulent activity.

Encouraging employees to report such observations creates an organizational culture of vigilance and accountability. It empowers them to act as additional eyes and ears for management, thereby enhancing the effectiveness of fraud detection mechanisms. Training programs that emphasize the importance of reporting suspicious activities can lead to earlier detection of fraud, which is critical in mitigating losses and addressing issues before they escalate.

While performance reviews, implementing security measures, and minimizing transaction errors are important aspects of overall fraud prevention, they do not directly involve the active engagement of employees in identifying and reporting suspicious behavior as vividly as reporting suspicious activity does. Therefore, the focus on employee reporting makes it a vital component of a comprehensive fraud detection strategy.