Watching for fraud

17 June, 2011
Page 30 

Difficult economic times can provide additional motivation to dishonest employees to commit fraud against their employer. What can you do to reduce the risk of fraud in your business?

What is fraud?

Surprisingly, in the UK, there wasn't a legal definition of fraud until the Fraud Act 2006, so fraudulent activity was covered by a number of different offences, including theft. Fraud involves deception and dishonesty, and can be summed up as concealed stealing.

Under the Fraud Act 2006 there are three possible ways of committing fraud to make a dishonest gain or cause a loss to another:

l False representation

l Failing to disclose information when under a legal duty to do so

l Abusing a position of trust by omission or commission.

What could an employee fraudster do?

l Over-inflated expenses: One of the most common types of employee fraud is a falsely inflated expenses claim. This would be an example of a false representation. However, there are a number of ways to prevent expenses fraud. Ensure your company has a comprehensive up-to-date expenses policy. This should require receipts against claims made and these receipts need to be checked against the claim. All expenses should be approved by an appropriate manager and nobody should be approving their own expenses.

Spot-check mileage claims by using web-based journey planners. Check journeys against diarised appointments for the employee.

l Fake suppliers: Employees can falsify accounts for example, by creating fake suppliers and approving payments to them, which actually go to the employee or their associates. Here are some ways to prevent this type of fraud:

Ensure your purchase invoice approval policies include checks against goods or services received in other words, matched to delivery notes.

Invoices should be approved by more than one person, especially if over a given value.

Always check new suppliers with Companies House or one of the credit reference agencies so that you can be sure they actually exist.

General cover

As well as actions you can take against specific forms of employee fraud, there are also some general measures that will reduce the likelihood of employee fraud:

l Staff duties should be segregated where possible and employees ought to be rotated periodically

l Introduce some spot checks and an internal audit cycle

l Always check CVs and follow up references, documenting the responses you receive.





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