The Fraud Squad

Whether it's done by customers, employees or organized criminals, fraud takes a bite out of business's bottom line. Here's what CSOs can do about it.

Investigative units need clout as well. They'll be ineffective if they're made up of low-level managers who lack decision-making authority. Mercuri has seen companies where fraud working groups or committees sit around and discuss ideas and possible solutions, but then must run to their managers before anything can be approved. At Citizens, the fraud committee consists of senior executives who can implement their decisions. Giving the group further credibility is the fact that it is chaired by the company's vice chairman. Mercuri credits the seniority of the group with the company's success in reducing fraud. "If there's a difference of opinion, we hash it out right there in that room," says Mercuri. "And once we come up with a recommendation, we can act on it quickly."

Beyond the fraud investigation unit, the CSO can make a positive difference by evangelizing to employees about the threats fraud poses. At companies like MassMutual, where most employees don't encounter fraud on a daily basis, Bonsall often acts as the harbinger of caution and awareness. Even when fraud occurs at another company, he talks to MassMutual employees about it, making sure they understand the vulnerability that was exploited and the preventive measure that should be taken in response. "We need them to stop thinking like good, honest people and to start [thinking like] the bad guys," he says.

The other challenge that Bonsall often encounters is that employees who suspect fraud is being committed are reluctant to bring their suspicions to the fraud-investigation unit. To counter this reticence, he markets the fairness and discretion of his unit to the company at large, hoping to ensure that people will come forward. "People like to try and take care of their dirty laundry on their own," he says. Often, employees will attempt to prove an instance of fraud themselves before bringing it to Bonsall's groupa habit that he is trying to stamp out. "I would rather that people bother us and have it turn out to be nothing than have it be something and then not have the evidence maintained to prove it."