Definition
“Fraud deterrence is the proactive identification and removal of the causal and enabling factors of fraud.
Fraud deterrence is based on the premise that fraud is not a random occurrence; fraud occurs where the conditions are right for it to occur. Fraud deterrence attacks the root causes and enablers of fraud; this analysis could reveal potential fraud opportunities in the process, but is performed on the premise that improving organizational procedures to reduce or eliminate the causal factors of fraud is the single best defense against fraud. Fraud deterrence involves both short term (procedural) and long term (cultural) initiatives.
Fraud deterrence is not earlier fraud detection, and this is often a confusing point. Fraud detection involves a review of historical transactions to identify indicators of a non-conforming transaction. Deterrence involves an analysis of the conditions and procedures that affect fraud enablers, in essence, looking at what could happen in the future given the process definitions in place, and the people operating that process. Deterrence is a preventive measure – reducing input factors” (Cendrowski, Martin, Petro, The Handbook of Fraud Deterrence).
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