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Virtual Audits Are Weapons of Choice Against Food Fraud

Denis Storey
September 4, 2020

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Supply chain threats are part of doing business in the food, supplement, and CPG industries. Yet many companies still rely on email and three-ring binders to conduct audits. Download our eBook to discover how to automate your audit program.

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Our world has been turned upside down by the COVID-19 pandemic. Which begs the question: where should food, beverage, and dietary supplements companies focus their resources while navigating these challenging times?

A good starting point might be to quickly review the differences between food fraud, food defense plans, and food safety.

  • Food fraud is intentional adulteration with the purpose of economic gain.

  • Food defense plans intend to protect a business against deliberate adulteration.

  • Food safety is a scientific discipline describing the handling, preparation, and storage of food to prevent foodborne illness.

Food Fraud 

Since food fraud occurs for economic gain, perpetrators work hard to ensure it goes undetected. Individuals who commit these crimes aren't concerned about food safety and can use a harmful substitution or dilution. Some examples of this are a 2008 incident involving melamine in milk powder and a 2015 event with ground peanut shells found in cumin powder.

Criminals need a motive and an opportunity, and the pandemic has opened the door for both. Motives have multiplied as financial hardship rises; markets plunge; unemployment reaches record-breaking highs, and many business sectors struggle. According to Stephanie Lopez, VP of Operations for the Americas at AIB International, “Opportunities for fraud increase when there's a disruption to normalcy. It's much harder to detect something out of the ordinary when everything is changing.”

Lopez outlined signals of increasing supply chain risk companies should look out for, including:

  • Have business demands shifted? For example, do you now have less restaurant demand and more grocery or retail demand?

  • Is demand higher for certain ingredients because of that shift? Has it caused you to cut corners, eliminating specific steps within your supplier qualification process?

  • Has ingredient availability been impacted? Making it more tempting to make compromises?

  • Does your staffing look different today than it did six months ago? Are your employees tired, scared, and less attentive? Have you had to hire new or temporary employees?

“These variations from the norm increase a company's vulnerability. Because the most prominent food fraud risk comes from suppliers," Lopez said. "The first step for food, beverage, and dietary supplements companies is to retain as much rigorous supplier approval and monitoring processes as possible. The fewer exceptions companies make, the better.”

"Suppliers shouldn't get a free pass, particularly new suppliers," Lopez added. "Audits help keep food safety top of mind. Continued oversight is essential. A great way to address this issue is by conducting desk or remote audits."

Audits are the Answer

Audits are more crucial than ever since the norms in most plants have shifted. Many manufacturers have decided that product inspection and ingredient testing remain essential to mitigating adulteration.

"The key here is related to staffing. Many companies are hiring temporary or new personnel to replace lost employees or to supplement the workforce. There's nothing wrong with this," Lopez added. "The key is not to expect temporary and new employees to take on all responsibilities. More experienced personnel should retain higher-risk activities. For example, if additional scrutiny is part of receiving, consider dividing receiving duties into low and high-risk tasks and then assigning only low-risk activities to less experienced personnel.

"As a refresher, liquid or finely ground ingredients are easier to dilute," Lopez pointed out. "Think about comparing the whole cashew vs. cashew powder or cashew butter. It's much easier to detect a foreign substance mixed in with whole cashews. We also have historical information that tells us which ingredients are fraud targets. Finally, the sourcing location can also influence the likelihood of fraud."

Supplier Qualification

Some countries have high political risk scores, which tend to correspond with food fraud. So, if companies are sourcing from a new supplier, it's essential to understand where each material originates.

"Finally, there's some temporary latitude regarding regulations right now," Lopez explained. "Companies must be clear about which regulations have latitude and which don't. Don't just take a supplier's word for it. For example, with fewer people going to restaurants and more people buying food from grocery stores, the FDA and USDA allow companies to sell products packed and labeled for food service to grocery retailers."

If ingredients arrive and aren't packaged or labeled in the usual way, it could be related to a temporary latitude with labeling. It could be that someone is providing a fraudulent ingredient.

"My second example here is about the FDA's Foreign Supplier Verification Program (FSVP)," Lopez said. "The FDA is exercising temporary enforcement discretion in which they do not require onsite audits for FSMA supplier verification. However, don't allow your foreign suppliers to refuse an audit. The temporary policy is only related to onsite audits, document review and other verification activities are still required."

To minimize supply chain risk, Lopez advises companies to:

  1. Identify sourced high-risk ingredients and ensure qualified individuals are executing established control measures.

  2. Prioritize new suppliers according to risk. Focus further actions on higher risk suppliers and ingredients.

  3. When onboarding new suppliers, it's essential to confirm the details. Don't rely solely on suppliers.

Virtual Audits

Necessity is the mother of invention – and innovation. And many innovations are emerging and being embraced during this pandemic, virtual audits included.

Why are virtual audits taking off right now?

  • Brand protection.

  • Supplier approval.

  • Training and education of onsite staff.

"Companies can't cut corners in these areas, no matter what," Lopez insisted. "But we do face some unique obstacles now, such as social distancing, travel restrictions, and visitor limits. These obstacles hinder the ability of auditors to travel to food facilities for inspections and audits."

Lopez outlined three variations of virtual audits:

  • Hybrid audit: An audit done partially online, or remotely, and partly onsite later. In this scenario, the auditor schedules the client's audit, using the client's preferred video conferencing platform. Then the auditor can review policies, procedures, and records online and conduct employee interviews. The auditor then follows up on the remote review with an onsite, unannounced inspection.

  • Remote audit: A 100% virtual audit. Documentation review is via video conference, and the inspection happens via a live streaming app. Clients select a device, typically a smartphone or tablet, to live stream the inspection guided by the auditor. There certainly are limitations – both visual and audio – to this type of audit.

  • Visual Audit: An audit designed to enhance the self-inspections already in place at a facility when individuals can't travel to each plant. Companies must ensure the onsite team is doing a top-notch job of self-inspection.

When evaluating virtual audits, Lopez recommends the following:

  1. Ascertain the reason for the audit. Is it for supplier approval? Is it to train employees or for brand protection? Answering these questions will help guide you down the path best for your company.

  2. Ensure your customer will accept a hybrid or remote audit if you're using it for sales purposes.

  3. Determine if live streaming is possible in the environment you're inspecting.

  4. Don't be afraid to pilot a virtual audit to test it out.

  5. Doing nothing is not an option.

Food Fraud During COVID-19

"In the age of COVID-19, FDA expectations haven't changed," Lopez said. "Companies are still required to ensure the food they're producing, or handling is safe, sanitary, wholesome, and honestly labeled."

The FDA has recognized there's unprecedented demand for specific food items, and they're trying to minimize disruption to manufacturers and the supply chain. One policy they've enacted to this end is to suspend routine FDA inspections. They've allowed importers to defer onsite audits, which are part of FSVP.

"While we know these policies are temporary, defined dates are unknown," Lopez added. "There are just too many unknowns with the pandemic, its impact on consumer behavior, and the supply chain."

Teams are busier than ever, making it critical to prioritize controls for higher risk ingredients. As part of a food safety plan, most companies have identified which ingredients are more susceptible to food fraud. And tools like TraceGains Smart Alerts can help by providing historical and emerging data to determine which ingredients to prioritize.

With TraceGains Audit Management, companies can bring up many desk audit materials as TraceGains has collected so many documents and data points from suppliers. Companies can reduce time spent discussing critical audit issues and turn their resources towards a virtual audit using any connected device.