Fraud: how can employers deal with deceitful employees?

Leicester University recently conducted a survey among a representative sample of 2,000 people, asking whether they would commit fraud if they knew they could get away with it. Disturbingly, seven in 10 admitted they would.

So it is not surprising that, according to research from CIFAS, a not-for-profit membership-based fraud prevention service, out of 127 organisations all but two had experienced employee fraud.  

About 1,500 employees are dismissed for fraud each year, but they are only the ones who are caught. As Alison Loveday, managing partner at law firm Berg Legal says: “Employee fraud is a growing issue in the UK. It has risen by 30% in the past year alone, and now costs the UK about £1bn each year, the highest in 10 years.”

Types of fraud

The government is the UK’s largest victim of employee fraud, but financial firms are a close second. Stephen Fox, senior partner at Betesh Fox, a law firm that specialises in fraud, says: “Very often employees committing fraud don’t even think they are doing anything illegal. It has become commonplace for people to take stationery from the office, or to put personal petrol and restaurant bills on the company account.”

He continues: “Yet there are also some more sophisticated versions of employee fraud for companies to think about. A prime example is buyers overpaying for goods and taking a cut of the excess. Another is temporary staff who take your company information – or even customer data – and sell it on. Much fraud is also committed by contract staff, such as cleaners, who have access to information on screens and in files.”

Loveday estimates that, despite these many dangers, only half of the UK’s top 350 companies have set up anti-fraud mechanisms. Fox agrees that many just turn a blind eye to the problem. Primarily this is because many believe that the cost of preventing and monitoring fraud will be greater than any savings they make. Many organisations, especially financial services companies, are unwilling to admit that they have fallen victim to fraud.

What can you do about it?

There is much that companies can do to minimise their exposure to these risks. Robert Myatt, director at HR consultancy Kaisen Consulting, advises companies to think about it during job interviews. He says: “You can force candidates to take honesty tests, and these have shown to be fairly accurate, but I think it’s going a little too far.

A better approach is to look for enthusiasm in an interview. If someone was planning to commit fraud in the job they won’t come across as enthusiastic about the role, what it will involve day-to-day and what they will achieve in it.”

Third party background checking is the answer, according to Steve Bailey, managing director at BackgroundChecking.com, an Experian company. He says: “We can run checks on permanent and temporary staff, checking details such as the exact dates of previous employment, job titles, criminal records, financial status, professional qualifications, employment gaps and even driving licence validity. One in 10 people for whom we perform a background check, and who state that they have no criminal record, do turn out to have one.”

Check ID and references

These two simple, inexpensive steps would do a great deal to reduce the incidences of employee fraud. Many companies do much more.

Alan Thomas, staff resourcing & development manager at Henkel, says: “We check CV facts, use psychometrics and behavioural interviewing questions; we take up references including verbal references; demand certificate copies, and conduct a six-month review.

“We also have a published code of conduct and our employee handbook clearly describes the reasons for instant dismissal. All invoices and procedures have the two pairs of eyes principle, and all expenses are receipted. The result of all this? In the past five years we’ve only had four cases of employee fraud.”

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