Spotlight on: company fraudsters

The typical company fraudster is a trusted male executive – sometimes even the chief executive – who gets away with more than 20 fraudulent activities over a period of up to five years or more.

This finding is based on research by KPMG Forensic, the fraud investigations division of the professional services giant.

“He typically works in the finance department and commits the fraud single-handed,” says Richard Powell, partner at KPMG Forensic.

Given that the total financial loss caused per company fraudster stands at more than £675,000 in nearly half of all cases, Powell believes HR should work harder on preventing, spotting and tackling fraud.

Preventive measures

“The first step is introducing a fraud policy that’s communicated throughout the organisation to help create a culture where employees are very clear about how unacceptable it is and what to do if they suspect it,” he says.

“So often, we see whistleblowing or reporting mechanisms set up, but the culture doesn’t encourage people to use them.”

Dave Martin, security consultant at LogicaCMG, adds: “Part of the policy should include regular and rigorous checks, and all staff should be made aware that this happens.”

With regard to detection, Powell advocates the use of data analytical tools to weed out unusual trends or transactions. “HR should also be alert to red flags such as an employee seeking to preserve their control over an area you wouldn’t expect them to be involved in, or a member of staff never taking any holiday,” he adds.

Investigations

The stickiest area of all for HR is the investigation of suspected fraud.

“The key here lies in gathering facts in an objective and fair way,” explains Powell.

“We encourage HR to have a response plan, which sets out clear do’s and don’ts.”

Risky business

The alternative, says Tony Hyams-Parish, partner at law firm Rawlinson Butler, is the risk of a constructive dismissal claim by an employee.

“That said, employers sometimes forget that they do not need to be sure of someone’s guilt to the criminal standard of proof,” says Hyams-Parish. “The important test as far as employment cases are concerned is that there is a genuine belief in someone’s guilt, and that such a belief is based on the results of a reasonable investigation.

“Conceivably, therefore, someone could be dismissed, but found not guilty by a criminal court.”

Gary Freer, partner at law firm McGrigors, warns employers that they may also be at risk of discrimination claims in the absence of a proper investigation.

“If you accuse someone of fraud who’s just back from maternity leave, or if they are older, for instance, they might claim they’re being victimised for such reasons, and that you were looking for a way to get rid of them,” he explains.

When the con is on…

If a fraudster is at large…

Do:

  • Get your facts straight, especially when dealing with senior people. The costs and negative publicity could be substantial, particularly as senior staff are more likely to take early legal advice and challenge decisions.
  • Carry out a full, measured and structured investigation, gathering objective evidence such as accounting information and expense claims. Only then should you confront your suspect.
  • Follow all usual disciplinary procedures.
  • Disclose any investigation to any regulators if you are part of a regulated industry.

Don’t:

  • Attempt to access someone’s computer to find evidence as it can change the trail of evidence.
  • Interrogate your suspect or ask leading questions. Asking open-ended questions elicits more information and ensures balance.
  • Forget to record all contents of the interview with the suspect.
  • Fail to bring in outside help if you don’t have in-house expertise.

By Kate Hilpern

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