As a society, fraud has run rampant for many years. There is always a desire to cheat the system and find a way to make money. Since COVID, the influx in these cases has risen at an exponential pace. The finance industry has worked tirelessly to control the rise of fraud cases but with the evolution of technology and other factors, fraud has proven to be a formidable opponent.
Between the increase in cases of identity fraud, wire fraud, money laundering, check fraud and mortgage fraud, the banks are under increased scrutiny from the regulators to formulate stronger fraud prevention programs. Through internal audits and examinations conducted by the regulators, financial services companies face potential program remediation, fines and mandates to increase staff.
The need to find solid strategies and to implement the proper controls is paramount. The banks must develop policies and procedures, conduct testing on the policies and controls that have been put in place, provide advisory services and incorporate technology to ensure they are keeping up with the demands of the regulators.
One way to meet the demands of the regulators is to focus on recruiting strategies. This is a contentious topic in terms of how to focus on staffing and the allocation of resources. For a company to make a thoughtful cost-effective decision, we must first look at the positives and negatives of hiring full-time employees versus contractors.
What are the positives and negatives of hiring Full-Time Employees vs. Contractors?
Having full-time employees is a crucial component for financial services companies to maintain a fraud prevention program that is in good standing with the regulators. Full-time employees provide long-term continuous monitoring of the fraud program. The full-time employees are more effective at building long-term key relationships with stakeholders, promoting a positive culture of compliance throughout the organization. This builds a heightened level of trust not only with the stakeholders but also with the regulators. Putting the right full-time staff in place shows the regulators how committed the firm is to implement a best in-class fraud prevention program.
There are many positives to hiring full-time employees, but this also brings forth some negatives the banks must take into consideration. The sheer cost of investing in one or multiple employees on a full-time basis can cost millions of dollars when factoring in insurance and other benefits. The firm could invest a significant amount of money, time and other resources to train each individual and they could end up leaving after a short period of time.
The sheer amount of time it takes for a company to source, interview, obtaining offer approvals, extending an offer and waiting for the candidate to start brings forth an even longer gap of time in which the program is not being adequately covered. This leads to the regulators looking more closely at the firm who may interpret this lack of finding someone as the company is not valuing the importance of a implementing a strong fraud prevention program. On the other hand, firms will look to hire contractors. Let’s look at the positives and negatives of a firm onboarding consultants.
The banks bring on temporary hires to ensure gaps and issues are remediated quickly and efficiently. The amount of time required to onboard a contractor could take only a few days as opposed to months for full-time employees. The cost of a contractor is significantly cheaper than hiring full-time employees. In addition, depending on whether a bank hires contractors through a recruiting firm or smaller management consulting firm versus one of the bulge bracket firms like the Big Four, the price could vary significantly.
While looking at the positives of contractors, we must look more deeply at the negatives of only hiring contract-based employees. Only hiring contractors to build out a fraud prevention program lacks long-term oversight of the fraud program as many contractors are brought into remediate issues, clear backlogs and put policies & procedures in place. Once the contractors are gone, the firm needs continuous monitoring of the program. With most engagements lasting upwards of 6 months or even a year, in which the contractors are working at the firm leading to difficultly in building long-lasting relationships with key stakeholders and the regulators.
What is the Solution?
To combat fraud, financial services companies look at all avenues and make critical decisions with respect to recruitment. It is best for organizations to first do their own assessments and bringing in a consulting firm(s) if the program is in dire need to determine where the gaps are, to understand the amount of remediation needed and the required headcount to revamp or build out their fraud prevention program.
Once an assessment is completed, it is best to have a mix of both temporary hires and Permanent employees. The temporary hires can come onboard to clear the backlogs, conduct further assessments and lay the groundwork for the implementation of policies and controls. The utilization of smaller consulting firms brings a cheaper cost to the bank while still getting high-quality employees. While having TEMPS on-site to remediate the program, the firms need to focus on bringing in full-time resources to bring forth constant monitoring of the fraud program.
This will buy time for the banks to identify what permanent needs they have and will allow them to focus on recruiting the right way. Firms can take more time to determine the exact skillset needed in a full-time hire. They can interview candidates with less pressure to hire ASAP thus helping to ensure they get it right the first time, reducing the costs paid to recruiting firms for multiple hires and reducing the resources expended to identify talent. Lastly, it allows the fraud program to have more consistency.
The full-time employees can focus their efforts to partner with business, building relationships with stakeholders and the regulators to understand where mistakes have been made, why it is happening and implementing key processes and controls to reduce fraud. This will bring a high-level of continuity, leading to the firm being in a business-as-usual (BAU) phase as opposed to consistently facing regulatory scrutiny for lacking the proper controls.
Ultimately, when focusing on recruitment, implementing the right approach to it and taking the time to listen to what industry peers are doing, financial services companies will create stronger fraud prevention programs. They will be able to build a positive culture of compliance firmwide and improve communication with regulators. This communication will cultivate a more proactive approach to maintaining and improving the fraud program leading to less fines.
Overall, it is imperative for financial services companies to communicate with other industry partners and recruiting firms to learn how to improve industry best practices and creating a program to help reduce fraud in the industry.
Meet The Author
Follow Matt Yeager on LinkedIn: https://www.linkedin.com/in/myeager21/
Comments