Thinking the unthinkable ... Trash as a tool to commit fraud

Our background in careers such as Accounting, Law, Auditing or Administration, has given us relative technical knowledge related to our work to help organizations to implement or improve internal control systems. A constantly changing legal and work environment forces us to stay on our toes and adapt. Likewise, a professional who is 100% related to risk management should be ready to think outside the box to anticipate changes in criminal strategy and behavior.

The perpetrators innovate and create new mechanisms to commit fraud and are always looking to exploit the gaps or weaknesses of internal control to achieve their objective. The theft of inventory and supplies is one of the criminal activities that retail companies suffer the most from. This is usually conducted as an inside job where workers collaborate with an external third party. Inventory, materials, and information can all be extracted from the company's facilities through transporting carts, hidden in wallets, attached to the body, and often in the garbage.

Do you as an Auditor check the garbage of the organization? Have you stopped to verify what happens when the collector car arrives at the company? Do you know who receives the recyclable material or who manages the final disposal of garbage in the organization? Although at surface level this seems to be a totally bizarre issue, the disposal of garbage can be the key to either the commission or prevention of fraud.

The disposal of garbage and recycling are two activities or areas loved by few but embraced by the perpetrators because it is not audited or controlled. If at any time you do not find the answer to the theft of inventory or the losses of cleaning supplies and office materials, I suggest you examine the garbage and recycling.

It is important to know who is responsible for the disposing process and what relationship or relationships they have with the inventory personnel.

In summary, use the following tips to safeguard your company:

Check the schedules and personnel of the collector cars

Audit the contents of garbage by opening bags and boxes, and prepare for surprises in what you might find

Look for documents, CDs, hard drives, USB’s, since an escape of information can also happen through the disposal of garbage.

Check how the recyclable material is processed by examining internal and external personnel, periodicity, type of transaction, among others.

Trust your intuition if at some point something in the garbage smells bad.

Edited by Christopher Bonk