The enem within • As the number of new businesses
Page 42
If you've noticed an error in this article please click here to report it so we can fix it.
has increased-614,000 since 1987 including many hauliers—so has the amount of business fraud. According to Thomas Helsby, executive managing director at international investigator Kroll Associates, it's not a case of desperate recession-hit individuals working up scams. There's simply been an increase in detection.
Recession has brought tighter margins to companies, and more attention is being paid to inconsistencies in the books. Most at risk from being defrauded are hauliers with five to 50 employees.
The one-man band, where the boss or his wife orders the stock, writes the cheques, licks the envelopes and balances the books, is less likely to be defrauded. Control is down to one person. In larger transport firms there are standardised security procedures, which are not fool-proof but they provide better safeguards. The medium-sized haulier is too big for the principal to handle all invoicing, credit chasing, payroll and banking personally and too small to have many security procedures. This makes them most likely to be defrauded either internally or externally.
SAFEGUARDS There's a common misconception that an annual audit safeguards against fraud. If auditors find anything suspect, they are obliged to report it, but they may not be responsible if they don't The auditors take a random sample and do not check every entry, so it could take years and some degree of luck for the audit to find an inconsistency.
Detective Inspector Davidge of Vine Street CID says most fraud can be avoided by following the maxim: "Lock up your cheque books and keep bank account details secure."
At the end of the working day, when everyone's left the operator's office, invisible visitors are able to wander around, open unlocked drawers, leaf through papers and go though the bin—the cleaners. Although most cleaners simply clean, they do have a perfect opportunity to extend their brief. The chance is there for them to gather the account details of the company and sample signatures maybe doodled on the back of an envelope or a discarded letter. Kroll , with more secrets than most companies, employs cleaners who come in before the end of the working day and are closely supervised.
Fraud is simple: a common fraud is using the bank sort code, address and account number to set up a standing order into the fraudster's account; say £30 per month. Several of these can quickly mount up for the fraudster and could go unnoticed for years.
The Inland Revenue has tried to safeguard incoming monies for Schedule D payments after a spate of payment envelopes somehow disappeared in the post The cheques ended up in bank accounts in the name of IL Revenue or variants. When mail doesn't make it to its correct destination, a fraudster can profit If bank details or cheques are enclosed, the result can be cheques paid into a remote account and then the cash withdrawn.
Anyone who's received a company cheque has the details. One method of obtaining those important details has been to write to PLC's enclosing a postal order for £10 and asking for a copy of the company report. Sooner or later, because the company report is free, the PLC cashes the postal order and sends back a cheque. Mission accomplished.
It may be very difficult to stop potential fraudsters from gathering bank details, but it is possible to stop internal fraud. Everybody deserves a holiday, even principals of small companies. But bills still have to be paid and it's common practice for the principal to sign a few cheques and give them to a trusted member of staff to fill in. This is not advisable, but if it is necessary, you can set a limit on cheques by instructing the bank. The good news is that if the member of staff writes him or herself a cheque for £10,000 over the limit and the bank honours it, the bank is liable. It's even more secure if the principal of a company is not the sole signee, and two or three signatures are required. And there is also a monetary limit on each cheque.
How do you know who is likely to have their fingers in the till? One company was systematically defrauded over five years by a cuddly Salvation Army tambourine-playing book-keeper. She was the last person anyone expected to do anything immoral, let alone illegal. So what are the signs to watch for?
UNSUPERVISED According to Detective Inspector Davidge, it may well be the person who appears to work the hardest; the first in the office in the morning and last to leave at night This allows for that extra bit of unsupervised time to delve into the books and have plans simmering. Harder to detect are frauds which start off internally with the complicity of people outside the company. Deals are struck whereby credit notes are issued against invoices for less than the value of the invoice for a kickback to the credit note issuer. The best way to counter this is not to have one person operating any function to do with money. Back up on all tasks and make secondary signing off a procedure. This means there has to be further complicity within the company for a scam to work.
Pilferage in cash businesses is almost impossible to stop. The stock control systems required to monitor the operation are probably more expensive to set up than it is for the company to simply absorb the loss.
Thomas Helsby at Kroll Associates advises that a company's best option is to engender an in-house atmosphere of morality. This means using good management techniques to increase loyalty as well as projecting the company view that "that sort of thing is not done here" and if it does, it leads to prosecution. Helsby says: "Tolerance of petty abuse such as minor expense fraud can create the right conditions for a substantial abuse to grow."
In many companies, employee management and dealings with suppliers and customers goes close to the edge of decent behaviour with the cry "that's business". If this is the manifestation of the company's philosophy, perhaps a little tickle of the petty cash seems paltry.
John Banham, past director general of the CBI, estimates that British business loses Lim per hour through theft, fraud, violence and arson— this is one of the few areas of industry where business is booming.
Merle Nygate