Many businesses are shocked not only when they discover a fraud, normally perpetrated by someone from within their organisation, but also by how little the police are often willing or able to do about the loss.
Frauds are often complex and difficult to prosecute. Even straightforward cases can take years to bring to trial and involve a great deal of time, money and risk to reputation. With current budget constraints the local police force has neither the time nor the expertise to properly investigate and prosecute most cases.
Businesses then frequently try the civil recovery route and often end up signing a compromise agreement with the offender(s) simply being dismissed, only to arrive at their next employer with the same plan.
The first piece of advice is to look at your recruitment policies and ensure that you fully research the background of new potential employees.
However ordinary, honest people do sometimes turn to fraud. What do you need to do with your existing staff to recognise this change?
Sometimes the way people behave might suggest that they are committing a fraud. These signs are called ‘red flags’. Although independently they may not be any cause for concern, a few at the same time may cause suspicion.
‘Red flags’ could be:
- Significant changes in behaviour that you’ve noticed
- An individual has large personal debts or financial losses, and a desire for personal gain
- A resistance to take holidays
- Constant working of unusual hours without supervision
- Audit findings deemed to be errors or irregularities
- Transactions taking place at odd times, odd frequencies or involving unusual amounts or to odd recipients
- Internal controls that are not enforced, or often compromised by higher authorities
- Discrepancies in accounting records and unexplained items on reconciliations
- Missing documents, or only photocopied documents available
- Inconsistent, vague or implausible responses arising from inquiries
- Unusual discrepancies between the client’s records and confirmation replies
- Missing inventory or physical assets
- Excessive voids or credits
- Common names or addresses of payees or customers
- Alterations on documents (such as back dating)
- Duplications (such as duplicate payments)
- Collusion among employees, where there is little or no supervision
- One employee has control of a process from start to finish with no segregation of duties
This is not an exhaustive list and it won’t pick up all possible cases, but vigilance and action on these areas will certainly help.
Consider having a fraud response plan and always avoid complacency – the fraudster’s friend.
For further advice regarding protection against workplace fraud, please contact David Arthur on 0191 285 0321 or email firstname.lastname@example.org