How to: Tips on preventing internal fraud

How to: Tips on preventing internal fraud

In the past six years, staff theft and fraud cost the UK retail industry more than £2.9 billion.

Fraud has been the fastest growing crime in the UK over the past decade, in some years reaching rates of growth more than 400%. In this economic downturn some people will consider alternative means to secure an income, not all of them legitimate.

More than two-thirds of fraud occurs in small to medium-size companies. However, creating an anti-fraud culture does not mean installing sophisticated software programs or extensive investment. It is about putting more diligence around basic recruitment practices and putting in place simple internal procedures for your business.

For new candidates

Confirm Identity

All employers should be collating the candidate’s identity and right-to-work documents at interview or point-of-offer stage. This is often seen as a chore, but it is critical.

Check for irregularities such as age, sex, nationality and appearance. Try using a UV light to identify passport security features.

Guidance on personnel security measures can be found on the Centre for the Protection of National Infrastructure website.

Employment Referencing

Be vigilant at following up references and seek a minimum of two in each case.

Fraudsters will present false information or collaborators as referees, so check the company is a genuine organisation and contact its reception or HR department to make sure the nominated referee holds the stated position.

Academic Referencing

Simply accepting a candidate’s academic history can be a mistake, even if they present you with what seem to be genuine certificates.

Contact the schools, colleges and universities to verify attendance and qualifications.

Confirm NI Number

Fraudsters will often operate under false National Insurance numbers, so confirm their authenticity with the National Insurance Office’s checking system.

It is also advisable to state the individual’s NI number on all reference requests to ensure it is for the individual and not a former colleague.

Use of Criminal Checks

As an employer, you have the right to ask candidates about unspent convictions.

Candidates can obtain a copy of a basic criminal disclosure from Disclosure Scotland and this can be built into the recruitment process.

Media Checking

If an individual has been involved in fraudulent activity, you may be able to find media coverage of it by searching for their name and details on the internet.

For existing employees

Small to medium-sized companies can introduce a number of measures to help detect fraudulent activity among staff. These are:

Balance of financial control

Allowing an individual to have end-to-end control of financial transactions is risky.

If financial transactions require multiple authorisations and signatures, it is more difficult for fraudsters to complete transactions.

Implement regular audits

By regularly auditing the business transactions – such as bookings or payments – you can create more robust control procedures that will allow you to detect irregular activity more easily.

Enforce holidays

Fraudsters will rarely take holidays other than odd days. This is to prevent their activities being exposed by a colleague covering their role.

Ensuring that everyone takes holiday will make it more difficult for fraudsters to remain undetected. 

Restrict the use of personal items

Restricting the use of mobile phones, USB sticks and access to personal email accounts during work hours will make it more difficult for fraudsters to transfer company data out of the organisation.



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