Reality check: Fraud in the workplace

Jan 14th 2011
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We like to believe that everyone is honest, no one cheats or takes unfair advantage, but the reality is that workplaces can be breeding grounds for bad behavior. UK criminal lawyer and fraud investigation expert Martin Cunningham offers advice for employers on how to spot possible dishonesty in the workplace. Below are a few signs to watch out for.

Check on early risers

If one of your staff invariably arrives earlier than anyone else (with the exception, perhaps, of the cleaners) it's a good idea to ask yourself why that person should be so dedicated and keen.

Could it be that the first person on the scene needs to be first to reach the office mail? Fraudsters can escape discovery for six months or longer after ordering supplies or making purchases - like car hire, hotels, meals, electrical goods, office and computer equipment - charged to the company's account. You won't know, as long as the crook intercepts the invoices, reminders, and threatening letters that come in the mail. The unpaid bills could have passed through the courts before you know anything is amiss. The fraudster may even prolong matters further by intercepting court communications, too. In a matter of months a person could run up debts in tens of thousands and blacken you company's reputation.

Solution: Change the incoming mail routine from time to time or arrange for your mail to be delivered to a post office box and have a trusted person collect it. Always separate the habitual early risers from the mail.

Check for phony qualifications

If someone works for you with little or no supervision, make sure they're doing their work. The trusted new employee could be an unqualified fraudster who knows just enough about your business to get the work outsourced to freelancers, suppliers, or subcontractors. You could be paying someone's salary or wages for months without realizing that that person has struck a verbal deal with a third party who'll want paying eventually, perhaps after the fraudster has moved on.

Always request references, check qualifications, and undertake unexpected spot checks on unsupervised employees with management buying responsibility. A recent case that came before the UK courts involved outsourced labor valued at over £1.3 million.

Revolve the bank mandate

It takes five minutes to change the name of the authorized signatories and counter-signatories on company checks. Just wake up one morning and do it. If anyone wants to know why, tell them you're acting on professional advice.

Even partners, co-directors, fellow shareholders, and employees with years of loyal service can be tempted to stray from the path of honesty when they are habitually handling large financial transactions.

It doesn't take a genius to cover the administrative tracks of a missing check for a significant amount. A periodic, unexpected change of the bank mandate has been known to throw up quite a few surprises. Try it. You've got nothing to lose.

Run credit checks

Almost every business worth its salt runs credit and credentials checks on new customer accounts. But what if one of the people responsible for doing the checks sets up a bogus customer account, approves it, then starts supplying the non-existent customer (at, say, a friend's or relative's address) with your goods or stock at no charge or notional prices?

Your accounting system would probably be fooled. Throw in a few regular refunds for non-existent supplies and someone has a damaging systematic fraud in progress. If one bogus customer account works, they'll probably try a few more - 10, 20, or however many the system will take before it starts to creak.

Solution: Make independent verification and credit checks on new account customers through a third party. One of your professional advisors would probably be able to arrange it. That way there's less chance of the bogus account fraud taking root.

Stay alert

The great majority of people who work in business and administration are honest, conscientious and truthful.

Experience has taught me that there are a few who are not. They can do enormous damage to an otherwise healthy business. Employers should stay alert to the possibility that a black sheep may stray into the fold. It is often the most amiable, agreeable, and well-liked individuals who con their way into legitimate businesses with criminal intent. Their victims are often well-seasoned business people.

You don't have to become a distrustful cynic in your dealings with your staff - just be aware that there are times when people who are not everything they would have you believe them to be try to get too close to your business and stay one step ahead.

About the author:

Martin Cunningham is a leading criminal lawyer and member of numerous recognized bodies and panels associated with fraud and fraud investigation. This material is excerpted from an article that appeared on our sister site,


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