Company Fraud Almost Doubles – Ten Tips To Protect Businesses

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Fraudulent activity is on the increase according to Cifas, prompting Advanced Business Solutions to offer advice

Insider fraud increased by over 40 percent last year according to a report from Cifas, a UK fraud prevention service.

The not-for-profit membership association compiles the National Fraud Database (NFD) and the Staff Fraud Database (SFD) to assist and inform its public and private sector members on fraud awareness and prevention.

Fiddle fest

In its latest report, Cifas found a 43 percent overall increase in the number of staff frauds recorded in 2012 compared with the previous year.

There was a 22 percent jump in theft or deception by staff to gain benefit, for example, by theft from customer accounts. Similarly, the stealing of customer data for personal use has also increased.

In tough times for job finders, attempts to obtain employment fraudulently by withholding or falsely declaring information, such as qualifications gained or non-disclosure of recorded convictions, doubled last year.

Advanced Business Solutions flagged the report and, unsurprisingly, it has a product in the fraud prevention market, Forensix. In true TV fashion, it must be pointed out that other products from competing vendors are available.

Forensix is designed for use by finance teams to detect a range of potentially fraudulent activities such as write-offs, discounts, and employees making unusual financial arrangements with external suppliers. Unusual and suspicious activities are automatically flagged for the attention of management.

Jumping on the findings of Cifas, the managing director of Advanced’s commercial division Simon Fowler has provided 10 anti-fraud tips.

Ten tips you can steal

  1. Assess the risks in your organisation – Do a “fraud audit” to determine which areas of your business are most, and least, susceptible to internal fraud. This audit could cover any history of internal fraud in the organisation, fraud detection and prevention processes in place, which technologies are in use, and their level of effectiveness for managing risk.

  2. Know your potential fraudsterResearch by KPMG has identified that the typical inside fraudster is a 36 to 45 year old male in a senior management position who works in the finance function or finance-related role, and has been with the company for more than 10 years. Obviously, staff who fit this profile should not be put under surveillance, however, understanding the profile of a typical fraudster may encourage a re-think of the organisation’s processes and the level of control or power certain individuals possess.

  3. Introduce a zero-tolerance culture – Place the topic of fraud high on the company’s agenda, make it an openly discussed topic and ensure staff are aware the company has a zero-tolerance attitude to fraudulent behaviour.

  4. Review and improve procurement processes – How easy would it be for a member of staff to create a bogus supplier and to raise invoices against them? Would a supplier changing bank account details be investigated? Procurement process reviews need to take place on an annual basis to safeguard against the risk of fraud.

  5. Implement technologies that provide fraud alerts – To help identify and prevent fraudulent activities, organisations need to be supported by effective technologies that can alert management to any unusual behaviour.

  6. Manage suppliers carefully – Having fewer suppliers can reduce the likelihood of insider fraud and so aim for a trusted shortlist of suppliers. Start by looking at inactive or ad hoc suppliers and then review supplier arrangements before implementing a strategy to deal with how the organisation’s suppliers are approved and subsequently managed.

  7. Consider electronic document management – Documents should be stored electronically using reputable document management products to eliminate the risk of paper documents being tampered with, “lost”, or shredded to suit a perpetrator’s needs. When a document is stored electronically, an audit trail of who has opened it, when it was opened, and what was subsequently done with it, can be recorded to provide a further layer of security.

  8. Automate expenses management – Determine how easy it would be for a member of staff to make a false expenses claim. Consider implementing a software system to automate the approval and management of expenses. The system needs to include safeguards to ensure staff can’t make large or unusual claims without checks being made. It also needs to ensure adherence to the company’s expenses policy.

  9. Integrate your IT systems – A fraudster will take advantage of loopholes in your systems and processes. Organisations that run a number of standalone systems will be at greater risk of fraud, compared with those that operates an integrated IT platform where a single” version of the truth” is provided.

  10. Carryout regular fraud reviews – It is important to continue to review the organisation’s fraud prevention measures and technologies. Inaugurate annual fraud reviews and consider carrying out role-play scenarios to see how easy it would be for a member of staff to carry out fraudulent activities.

Perhaps the most interesting suggestion from a channel viewpoint is the limiting of suppliers to a minimum. An added argument for loading up an account with extra services.

At the same time this should be a warning for the government’s G-Cloud team whose aim is to increase its pool of suppliers. The aim is to create a more competitive ecosystem but, according to Fowler, this may make the system vulnerable to fraud. It’s a good job we can trust the government not to abuse the potential to pile up a few extra expenses.

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Author: Eric Doyle
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