Recent figures released by the Fraud Prevention Service revealed a 52% increase in fraud committed by employees in the first half of 2012. The prevailing theory as to why businesses have experienced such a dramatic increase in theft from their own employees is that it is due to the economic downturn. Job insecurity, a lack of employee engagement and a sense of entitlement have also been mooted as possible causes.
What is clear is that internal fraud poses a huge risk to businesses, not just in the pure financial sense, but in terms of damage to hard-won reputations.
Of course, the difficult issue for businesses is that they do not know that they are victims of employee fraud until it is uncovered, at which point the damage is already done. So, what proactive steps can you take to address this risk? The first option is to seek assistance with crime reduction and advice around minimising security risk - both in terms of physical security and IT security.
Another tactic is to learn how to spot a potential fraudster. According to KPMG ("Who is the Typical Fraudster?" - 2011), the typical employee committing fraud against his own company will be male, between 36 and 45-years-old, holding a senior management position, and with continuous service of more than 10 years. There is also a suggestion that such employees do not take regular holidays, in the fear that their fraud will be uncovered in their absence.
In other words, and contrary to popular belief, the prime candidates are your most trusted, long-serving, hard-working and senior employees. These individuals will usually command a lot of trust and are frequently responsible for implementing checks and balances on the transactions of others. With that in mind, is there anything else you should be looking out for in employees themselves, and what can you do to minimise the opportunities for fraud to take place?
Nine ways to minimise fraud opportunities
1. Increase your internal controls. Fraudsters will usually have access to money or stock, depending on the nature of your business. Particularly for those individuals in finance roles or with access to money, introduce spot checks, regular reviews or audits, and make sure that these are carried out, preferably by somebody different each time. This should apply to every level