by Jim Marasco, CPA, CIA, CFE

Fraud Matters, Winter 2013

In the last ten years, we’ve witnessed a revolution of sorts in how people and businesses communicate with each other. The birth of a whole new industry has taken root – the Social Media phenomenon has flourished. Learning to manage this outlet can not only grow your business, but can help safeguard it as well. Social Media has been defined by Webster’s as “forms of electronic communication through which users create online communities to share information. Most of us now assimilate this with Facebook, Twitter, LinkedIn, blogging, etc. A tremendous amount of information is being shared with the general public everyday. Learning to use this information to safeguard your organization could give you a competitive edge.

Hiring

Most companies are now requiring background evaluations. In addition to criminal checks, verifications with on-line databases are now easier to perform than ever. A simple Google search can turn up a treasure trove of valuable information. In addition, checking the sex abuse registry, professional license credentials and academic validation has become simplified and routine. Some companies will also review public pages of applicants’ MySpace or Facebook accounts. In some states, legal battles have ensued over whether an employer has a right to request access to someone’s private profiles. By using information that easily attainable and performing due diligence on the front end of the hiring process, you may save yourself from problems later on.

Internet Retail

For some manufacturers/distributors, surfing Internet sites like Ebay or Craig’s List for their unused products has become routine. By checking the quantities available and the pricing that’s being offered, companies can spot possible theft issues from within their own organization or their retailers.

Coupon or Discount Fraud

Organizations offering discount codes or coupons should be routinely changing these offers and searching the Internet for their unauthorized distribution. Numerous sites are available that offer discount codes and printable coupons for nearly all retailers. Unknowingly allowing their use could prove disastrous to your margins.

Smart Phones

As smart phones are growing more popular, technology and sophistication have become powerful tools to shoppers. For example, applications like QRReader and ScanLife have made it simple to scan products and check their prices versus competitors in seconds. Offering to beat competitors’ prices by 15% could prove disastrous with the ease in which customers can verify this information. In addition, “showrooming” has become popular. This occurs when customers visit brick-and-mortar stores to examine products and then search the web for better pricing. Savvy retailers are becoming attuned to this practice and are pricing their products accordingly.

Investigations

Social media is increasingly being used in performing investigations. Insurance companies are using Facebook to investigate individuals collecting disability or workers compensation to monitor a recipient’s activities or to validate other information. Other organizations are watching at what point in the day their employees are posting to their accounts or where they might be while calling in sick. Examining the profiles and pictures of suspected perpetrators has also proved valuable. Social Media allows you to place a name with a picture and examine close associates who may also be involved with the fraud being investigated.

Legal Issues

While we’ve examined a few ways social media is being used to safeguard companies, the possibilities are endless. However, organizations should be aware of what they can legally do in their own jurisdictions. Basing hiring decisions on what you discover on-line may have to be disclosed to the applicant. In addition, denying someone financing on a loan or canceling their workers compensation benefits could result in legal repercussions. Although Social Media has proved incredibly valuable to fraud examiners, it’s probably best used in conjunction with other fraud prevention techniques.