Family office fraud is not something that you read about in the media due to the confidential nature of the industry. Many family offices function as investment managers, whereby a single employee of a smaller organization, may have access to cash and other assets. As a CPA, I have been trained to always look at the segregation of duties as a “key principle” to avoid any type of fraud.
The first step to take in avoiding fraud, is to acknowledge that fraud is a possibility. The family should be educated on how fraud can be committed, and they should implement procedures such as periodic risk assessments to determine whether there is the likelihood of any occurrence of fraud.
There are some key indicators that the family members can be trained to look for such as:
-Employees not taking more than a few days of vacation at a time
-Employees working long hours, getting in before everyone and staying later than anyone
-Employees not wanting anyone else in the office to be able to handle their role when they are out of the office
-Poor communication or strained relationships between certain employees
There are some ways to circumvent fraud which would include:
-Cross training of employees and rotating their roles
-Requiring employees to take at least two weeks of consecutive vacation
-Utilize risk assessment techniques to periodically “test” the operating procedures and controls
-Segregation of duties
If you have any additional questions or want to discuss your hiring needs or any other relevant issues, please feel free to contact: Michael Rosenblatt at FON Search or: firstname.lastname@example.org 212-971-0033 x313.