In today’s world, fraud and the various types of fraud that individuals and businesses fall victim to are not only increasing but developing in sophistication and severity.
In fact, fraud currently accounts for approximately 40% of all crimes in England and Wales (reports from the National Crime Agency).
The hardest part….charities are no exception.
Whether a charity is the victim of fraud or, in some cases, the charity is running a fraudulent business, it is the trustee’s responsibility to govern and protect the charity, manage the assets, and ensure all governance areas are adhered to.
Types of fraud
AI and phishing – emails or messages are sent by cybercriminals who will impersonate reputable companies in an attempt to obtain private and confidential information. Ensuring everyone in the charity is aware of what a phishing email may look like and some of the signs to be aware of (misspelled words, wrong email address, blurry logo) are vital. However, this is becoming more challenging as phishing emails can now be very “real” due to the implementation and use of AI.
Malware and ransom attacks – falling victim to malicious software entering your system and holding your data and information hostage until you pay a ransom can happen by simply clicking on a link in an email or downloading a PDF that you believe to be from a trusted source. In some shape or form, your charity will most likely hold information on systems and software. Whether this is beneficiaries’ data or your accounting information, it must be protected. Implementing firewalls and having the right anti-virus software is a step in the right direction.
Internal fraud – as a charity, it is sometimes hard to believe that you can fall victim to internal fraud; however, as recent news headlines show us, internal fraud does happen. As trustees, you are responsible for ensuring that you have the right processes in place, additional checks, and security measures to minimise this risk.
Trustee Responsibilities
Unfortunately, we are seeing an increase in fraud in the sector, with reports linked to poor accounting practices and non-reporting of charity funds.
These two areas, among others, are a significant part of charity governance and fall into your responsibility as a charity trustee.
With reports from the Charity Commission highlighting cases of misconduct, mismanagement, and misleading information relating to internal fraud situations – providing the right information (regarding your donated charitable funds) to the right people at the right time has never been so important.
To learn more about what you need to know about data governance, you can check out our post on the topic here, which provides you with helpful tips and information, as well as Charity Commission guidance on governance.
Specifically, the Charity Commission CC8 checklist – the internal financial controls that charities must implement and trustees are responsible for assessing.
These financial controls help trustees manage charity resources, assets, and money to avoid fraud and financial mismanagement.
Fraud Awareness Week
A big week in the sector calendar is Charity Fraud Awareness Week.
Taking place this year on the 25 -29 November, Fraud Awareness Week looks to raise awareness by sharing good practices among charities.
There are various ways to get involved, from attending online webinars, promoting Fraud Awareness Week and your top tips online, talking to others, taking part in the social media campaign, and more.
Bringing together charities throughout the UK, Fraud Awareness Week allows us to build on our knowledge, be aware of the fraud risks, and take the most appropriate steps to keep charity money, people, and data safe.
Our tips to protect your charity from fraud
- Make sure you have the right processes and procedures in place and that everyone, from your trustees to your charity manager and volunteers, is aware of these.
- Carry out risk assessments on data, systems, new staff, volunteers, etc. And make sure to stay on top of your risk register.
- Provide training and show people what fraud looks like and how to stop falling victim.
- Ensure all trustees are aware of the Charity Commission CC8 checklist, helping to prevent fraud and mismanagement of information and data.
- Strengthen IT with the use of fraud protection tools and anti-virus software applications. There are some great digital companies out there that work specifically with charities to help in this area.
- Have a response plan. If the charity falls victim to fraud, what do you do? What is your process for reporting and responding? For example, trustees have a responsibility to report any incidents to the charity commission as soon as they occur, and this should be built into your charity governance.
Fraud and Charities
As a trustee, understanding all aspects and forms of fraud has never been so important. Not only do you need to meet your legal requirements and run the charity effectively, ensuring you’re meeting your charitable aims, but you have to do all this while keeping your charity data, people, and information safe.
This is why Fraud Awareness Week is so important.
Providing you with the tools and network to support your approach to fraud; make sure to take part, have your say, and strengthen your knowledge to help you manage and mitigate risk.
