Fraud awareness and prevention FAQs

Fraud awareness and prevention is about understanding the different ways fraud can occur and putting measures in place to reduce the risk of it happening.

To prevent fraud, you need to recognise warning signs, know how to report concerns, and use controls such as clear procedures, checks, and monitoring to stop fraudulent activity.

The aim is to protect individuals and organisations from financial loss, reputational damage, and legal consequences.

Fraud involves deception—someone lies, manipulates information, or creates a false impression to obtain money, assets, or a benefit. For example, submitting fake invoices or pretending to be someone else to access funds.

Theft involves taking something without permission but does not rely on deception. For example, stealing cash from a till or taking equipment home without authorisation.

So, while both are dishonest, fraud is achieved through trickery, whereas theft is taking property directly.

Common types of fraud include:

• Financial fraud – such as false expense claims, payroll fraud, or misappropriation of funds.
• Identity fraud – using someone else’s personal information without permission.
• Cyber fraud – including phishing, malware attacks, and online scams.
• Procurement fraud – manipulating purchasing processes, kickbacks, or inflated invoices.
• Invoice fraud – submitting fake or altered invoices for payment.
• Investment or payment scams – convincing individuals or businesses to transfer money under false pretences.

These forms of fraud can occur in organisations of any size and often rely on deception or misuse of trust.

Examples of internal fraud include:

• False expense claims or inflating legitimate expenses.
• Payroll fraud, such as creating fake employees or altering pay.
• Misuse of company funds, including diverting payments or skimming cash.
• Theft of assets, such as equipment, stock, or data.
• Manipulating financial records to hide losses or personal gain.
• Abusing purchasing processes, for example approving fake invoices or favouring certain suppliers in return for kickbacks.

These forms of fraud are carried out by employees or others working inside the organisation and often exploit gaps in controls or oversight.

Fraud usually occurs when someone exploits weaknesses in processes, controls, or oversight for personal gain. It can arise through poor segregation of duties, lack of monitoring, weak approval systems, or ineffective reporting channels. Fraud often involves deception, concealment, or misuse of authority, and may be carried out by employees, suppliers, customers, or external attackers.

Strengthening controls and encouraging a culture of transparency helps reduce these risks.

The fraud triangle is a model used to explain why fraud occurs. It shows that three factors are usually present at the same time.

• Pressure refers to a personal or professional stress, such as financial difficulty, debt, or performance targets.
• Opportunity exists where controls are weak, allowing someone to commit fraud without being easily detected.
• Rationalisation is how the individual justifies their actions, for example believing they are only “borrowing” money or that they deserve it.

Reducing any one of these factors makes fraud less likely, which is why strong controls, clear reporting routes, and an open culture are so important.

Social engineering in fraud is when a fraudster manipulates people rather than systems to gain access to money, data, or accounts.

Instead of hacking technology, the criminal exploits human psychology, using tactics such as urgency, authority, fear, or curiosity to pressure someone into acting without proper checks. This might involve posing as a colleague, senior manager, supplier, or trusted organisation and requesting sensitive information or urgent action.

Social engineering works because it targets people’s trust and emotions, making it one of the most common and effective forms of fraud.

CEO fraud, also known as business email compromise (BEC), is a type of fraud where a criminal impersonates a senior executive or trusted supplier to trick an employee into making an urgent payment or sharing sensitive information.

It usually involves a convincing email or message that appears to come from a CEO, director, or finance lead, often marked as urgent or confidential. The fraudster relies on authority and time pressure to bypass normal checks, particularly targeting finance or payroll staff.

Vishing (voice phishing) involves a fraudster calling someone while pretending to be a trusted person or organisation, such as a manager, bank, or IT support, to pressure them into sharing information or taking action.

Smishing (SMS phishing) uses text messages that appear legitimate and often create urgency, for example warning of a security issue or requesting immediate confirmation, with the aim of stealing information or money.

AI is used to commit fraud by making scams faster, more convincing, and harder to detect.

Fraudsters use AI to generate highly realistic phishing emails, impersonate writing styles, and personalise messages using publicly available data. More advanced attacks involve deepfake audio or video, where a criminal mimics a manager’s voice or appearance to authorise payments or request sensitive information during phone or video calls.

AI can also automate large-scale attacks, test which messages work best, and adapt in real time based on responses. In short, AI increases the scale, realism, and success rate of fraud by removing many of the traditional warning signs people rely on.

Authorised push payment (APP) fraud is when a fraudster tricks someone into voluntarily sending money to an account they control.

The payment itself is authorised by the victim, often after being misled into believing it is legitimate (for example, a request to pay a new supplier, move funds to a safe account, or settle an urgent invoice). Once the money is sent, it can be difficult to recover.

APP fraud is particularly dangerous because it bypasses many traditional security controls, relying on deception rather than technical compromise.

Red flags of fraudulent activity include:

• Inconsistent or missing financial records
• Unusual transactions or payments that lack clear justification
• Bypassing normal approval processes or reluctance to follow procedures
• Employees refusing to take leave or being overly protective of their work
• Suppliers or invoices that seem unfamiliar or duplicated
• Unexplained lifestyle changes, such as sudden increases in spending
• Complaints or concerns raised by colleagues or customers

These signs don’t always mean fraud is occurring, but they warrant further attention and investigation.

Employees can spot signs of fraud by looking out for unusual or unexplained behaviour, inconsistent records, or actions that don’t follow normal procedures.

Warning signs may include missing documentation, unexplained changes in financial data, reluctance to share information, bypassing controls, or colleagues living beyond their apparent means. Noticing small irregularities early can help prevent more serious fraud from developing.

Controls that help prevent financial fraud include:

• Segregation of duties, ensuring no single person handles an entire financial process from start to finish.
• Clear approval processes for payments, purchases, and expense claims.
• Regular audits and reconciliations to identify unusual or unexplained activity.
• Access controls that limit who can view or change financial records.
• Supplier and payment verification checks to prevent fake or altered invoices.
• Robust record-keeping so transactions are transparent and traceable.

Together, these controls reduce opportunities for fraud and make irregularities easier to detect.

Employers can prevent fraud by putting strong controls and clear processes in place. This includes:

• Segregating duties so no single person controls an entire financial process.
• Carrying out regular audits and monitoring to identify unusual activity.
• Implementing clear policies and procedures, including approval steps.
• Conducting due diligence on suppliers, contractors, and new employees.
• Providing fraud awareness training so staff can recognise risks and report concerns.
• Encouraging a transparent culture where employees feel confident raising issues.

These measures help reduce opportunities for fraud and make it easier to detect.

Digital or cyber fraud can be prevented by:

• Using strong passwords and multi-factor authentication to protect accounts.
• Keeping software and security systems up to date to reduce vulnerabilities.
• Training employees to recognise phishing, scams, and suspicious links.
• Limiting access to sensitive data so only authorised staff can use it.
• Encrypting data and using secure networks, especially when working remotely.
• Monitoring systems for unusual activity and responding quickly to alerts.

A combination of technical controls and employee awareness is the most effective way to reduce cyber fraud risks.

The two-person rule for financial changes is a control that requires at least two independent people to verify and approve sensitive financial actions.

It is commonly used for changes such as supplier bank details, payment instructions, or high-value transfers. One person may receive the request, but a second person must independently verify it, usually by calling a known, trusted contact number rather than one provided in the request.

This rule reduces the risk of fraud by preventing a single individual from being pressured, deceived, or rushed into making a payment without proper checks.

You should slow the situation down and verify before acting.

High-pressure requests are a common fraud tactic, designed to make you bypass normal checks. If someone asks for sensitive information or urgent action, pause, don’t respond immediately, and verify the request through a trusted, independent channel (such as calling a known number or checking with a colleague or manager).

It is always acceptable to say no or not yet. Legitimate requests can wait; fraudulent ones rely on urgency.

Training helps reduce fraud risks by increasing employees’ awareness of how fraud occurs, what warning signs to look out for, and how to report concerns safely. It reinforces organisational policies, promotes consistent behaviour, and helps staff understand their role in protecting assets and data.

Well-informed employees are less likely to be manipulated by scams and more likely to follow procedures that prevent fraud from occurring.

Responsibility for reporting suspected fraud lies with any employee who becomes aware of it, as everyone has a role in protecting the organisation.

Most workplaces expect concerns to be raised through a manager, HR, the finance team, or a designated whistleblowing channel.

Senior leaders are responsible for ensuring reports are handled properly, investigated fairly, and managed in line with organisational policies and legal obligations.

If you suspect fraud, you should report your concerns promptly through the organisation’s designated channels, such as your manager, HR, or a whistleblowing hotline.

Avoid confronting the person involved or conducting your own investigation, as this can compromise evidence. Provide as much information as possible so formal procedures can be followed to investigate the matter confidentially and fairly.

Most organisations expect that mistakes can happen, especially with increasingly sophisticated scams. Delaying or hiding an incident is what causes the most harm, as it reduces the chance of stopping or recovering the loss.

If you think you may have fallen for a scam, report it as soon as possible so action can be taken to protect systems, alert the bank, and prevent further damage.

Whistleblower protection refers to the legal safeguards that protect employees who report wrongdoing in good faith, such as fraud, bribery, or serious misconduct.

In the UK, whistleblowers are protected from being dismissed, disciplined, or treated unfairly because they raised a genuine concern. The protection applies even if the concern later turns out to be mistaken, as long as it was raised honestly and responsibly.

These protections exist to encourage people to speak up early, helping organisations detect and stop serious issues before they escalate.

Action Fraud is the UK’s national fraud and cyber-crime reporting service.

It is the central point for reporting fraud, scams, and online crime to the police. Reports made to Action Fraud are assessed and passed to the National Fraud Intelligence Bureau (NFIB), which decides whether there is enough evidence for police investigation.

The consequences of committing fraud at work can be severe and may include:

• Disciplinary action, up to and including dismissal.
• Criminal prosecution, which can lead to fines, a criminal record, or imprisonment.
• Civil action to recover losses.
• Damage to professional reputation, making future employment difficult.
• Loss of professional licences or memberships, where applicable.

Fraud harms both the organisation and the individual involved, with long-lasting legal and career consequences.

Fraud can seriously damage an organisation’s reputation by undermining trust among customers, employees, investors, and partners. It may create doubts about the organisation’s integrity, governance, and financial reliability.

Negative publicity can lead to lost business, reduced investment, regulatory scrutiny, and long-term harm to brand credibility, even after the fraud has been addressed.