Partner Article

Insider fraud and how to prevent it

Phil Loveday, Fraud Specialist at UNW, shares his expertise on insider fraud.

In recent years, fraud has risen astronomically. If you drop your guard, there will always be someone willing to take your money off you. Shops, banks, supermarkets and other retail outlets take appropriate steps to reduce fraud and all businesses should do the same or suffer the consequences.

One of the hardest types of fraud to detect is “insider” fraud. This is particularly prevalent in SME’s where firms may put huge reliance and trust in individual employees or directors. This can have catastrophic results when employees who appear plausible, genuine and trustworthy are the opposite. Those people may well be professionals and good at their jobs, but for whatever reason, succumb to temptation and steal.

Whilst in the fraud squad, I led several such investigations where trusted employees or company directors stole from their employers. Examples include Peter Walker, a director at Liebherr cranes in Sunderland who stole almost £1 million over seven years, Douglas Long, an accountant who stole £150,000 from his employers EGS, and Peter Spoors, finance director at Miller Homes who helped himself to £380,000.

We also had successful investigations concerning local solicitors, doctors and dentists which were similar in many respects.

The common thread was that the systems and controls in place were inadequate and the crimes continued over a period of years to the detriment of the employer, often with catastrophic results.

Fraud, specifically insider fraud, can never be completely eliminated, but all businesses can, and should, take steps to ensure that this risk is minimised.

Ensure there are robust recruitment procedures in place. Draw up a self-declaration form for staff and check references for new starters.

Regular reviews of internal systems are an obvious step. Every company is different, but firms should have systems in place whereby no single person has responsibility for payments and adequate controls are in place to guard against fraud.

Every business needs an anti-fraud culture and an employee code of ethics and conduct. Whilst this won’t eliminate fraud, the standards it outlines will set a clear benchmark for employee behaviour.

And finally, if you suspect you are a victim of fraud, contact either myself or another fraud specialist to investigate it!

This was posted in Bdaily's Members' News section by Leigh Chelton .