More than money: The lasting impact of fraud

March 23, 2026 - Defence Stories

Estimated read time - 2:15

Fraud's non-financial impacts to the Department of National Defence (DND) and the Canadian Armed Forces (CAF) can be broader and longer lasting than direct monetary losses.

Fraud is the deliberate use of deception by employees, contractors, or external parties to gain an improper or unlawful benefit. It can include actions such as falsifying information, misrepresenting facts, or concealing key details to influence decisions or obtain payment. Fraud is not always easy to detect and can occur within processes such as procurement, travel claims, and financial reporting.

For the Defence Team, consequences can include reputational harm, psychological strain, operational disruption, regulatory scrutiny, and erosion of trust-each requiring sustained leadership attention and disciplined follow-through.

Instances of fraud, whether originating inside or outside our organization, can have swift and far-reaching effects.

Reputational harm

Stakeholders and partners may re-evaluate their associations, suppliers might reassess their engagement, and public trust can diminish. Unlike direct financial impacts, reputational damage can persist and may only improve and be rebuilt through openness, ethical conduct, and steady corrective efforts.

Psychological and organizational well-being

The effects of fraud are often felt well beyond the balance sheet. Individuals and teams may experience a sense of increased stress, particularly if investigations are lengthy or outcomes unclear, which can affect workplace morale, productivity, and retention. Fostering a supportive environment and ensuring prompt, clear communication is essential to sustaining a culture where colleagues feel safe to speak up.

Operational disruption

Fraud diverts vital resources away from military preparedness, technological advancement, and mission-critical needs. This can have severe, direct effects on defense capabilities, ranging from compromised national security to weakened operational readiness.

Investigations require staff to allocate time to evidence collection, formal reporting and improvements to internal controls, which may temporarily slow decision-making processes. When internal and external actors are involved, these events can reveal areas for improvement in governance and oversight, leading to more robust training, process updates, and, when necessary, organizational changes.

Erosion of trust

Fraud damages confidence in leadership, peers, and processes. Rebuilding this trust takes time, visible commitment to integrity, and consistent follow-through.

What Defence Team members can do

• Speak up: Report suspected fraud or conflicts through established channels.
• Follow controls: Adhere to approvals, segregation of duties, reconciliations, and records management.
• Protect information: Safeguard sensitive data, preserve evidence, and maintain confidentiality.
• Manage conflicts: Declare real, potential, or perceived conflicts of interest promptly.
• Be vigilant: Watch for red flags in procurement, travel claims, assets, and system access.
• Document actions: Keep clear, factual records that support transparency and accountability.
• Learn continuously: Complete required training and refreshers on ethics, security, and fraud risk awareness.

Key takeaway

Losing money to fraud is something you can see right away, but the less visible effects, like damage to trust, morale, and reputation, can have even greater consequences.

If you observe suspicious activity, report it. Reports can be made confidentially through your supervisor or chain of command, the Internal Disclosure Office (accessible only on the National Defence network), or external organizations such as the Public Sector Integrity Commissioner.