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The enemy within
Page 26
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As the recession bites, fraud is likely to increase. Make sure you don't fall victim to either your employees or suppliers.
Words: Simon Bevan Fraud is always a problem, hut never more so than during times of economic hardship, when temptation and need are greater.
It won't be surprising then that according to the recent annual FraudTrack report from BDO Stoy Hayward, the audit, accounting and business services firm, reported fraud in the UK stood at £1.19bn for 2008. up 14% on 2007's figure of £1.04bn. However, the survey covers only reported cases of fraud in the UK before the recession really started to bite. But this is just the tip of the iceberg since the total amount of actual fraud is certain to be substantially greater.
The report highlights the fact that fraud in the financial and insurance sector rose by 83% to £788m and accounted for 66% of all cases in the UK. Fraud perpetrated by third parties such as suppliers and customers hit £273m during 2008— an astonishing increase of 347% on the 2007 figure.
Whistle-blowing Examples include suppliers under-delivering goods and perhaps overcharging for the pleasure of that underdelivery. Customers will defraud suppliers when they see weak systems — claiming under-deliveries of stock when, in fact, the delivery was correct, withholding payment for 'disputed invoices', and simply disappearing without paying are very common.
Many investigations are started by a whistle-blowing letter within a business or organisation. Management must be decisive — always look into the claims made and always investigate. The whistle blower may not be correct, but there is usually something amiss.
Unfortunately, whistle blowing may fall during a recession because employees won't want to rock the boat when jobs are scarce. Redundancies are now common and many people are just thankful to have a job. Why would they want to cause trouble by whistle
blowing? More likely, they will put their heads down, work hard and be thankful they can still pay their mortgage.
Average prison sentences for fraudsters have increased by nearly 25% in length. The sentences of those involved in major frauds (valued at more than £50m) have also risen.
Greed and the desire for a lavish lifestyle remain the motives for fraudsters in nearly two thirds of all cases. The paying of debts and gambling problems are the other motives. Where people are pushed by debt or gambling, the fraud they are most likely to commit is theft and cash fraud.
Males aged between 20 and 39 make up the largest group of fraudsters, with the second-placed category being males aged 40 to 59. Some 80% of all frauds in this year's survey were committed by men. •
• Simon Bevan is national head of BDO Stoy Hayward's Fraud Services team.