February 9 2007 - Staff fraud is increasing. Examples of "insider fraud" make
headlines almost daily. This can damage businesses
reputation, brand and staff morale as well as losing
thousands of pounds. Employers must be on their guard when
vetting prospective employees and ensuring that the
environment for existing employees is one in which fraud
cannot prosper.
CIFAS, the UK's Fraud Prevention Service, and the Chartered
Institute of Personnel and Development (CIPD) have launched
free guidance to help employers understand the threats
associated with fraud and help HR professionals manage
the risks.
John Hinds, Policy and Projects Manager at CIFAS and
co-author of the guide, says: "The majority of staff
within any organisation are trustworthy and honest.
But businesses are now beginning to understand the scale
of the threat posed by the small proportion of staff
who act dishonestly and defraud their employer.
"CIFAS research shows that staff fraud can have a negative
impact on businesses in terms of their reputation, costs
and customer service. As a result, staff fraud is now
emerging as the single most significant fraud risk both
to the financial services industry and to businesses
handling financial transactions. It is also a serious
risk to all businesses."
"The way in which organisations approach the issue of
staff fraud is changing to respond to the increased risk.
Many organisations have historically been anxious to play
down the threat from within and have been reluctant to
admit to the scale of the problem or the associated
financial losses. "
"However, for many organisations, the days when the
majority of staff fraud cases would be handled quietly
with no publicity, allowing the dishonest employee either
to resign discreetly or be dismissed inconspicuously are
long gone. Indeed a number of businesses are now taking
this a step further by sharing with each other, through
CIFAS, data about staff fraud within their organisations.
Businesses should aim to create a rigorous internal
anti-fraud culture that promotes honesty, openness,
integrity and vigilance throughout the workforce."
The guide, Tackling Staff Fraud - Guidelines for Employers,
HR and Line Managers, offers advice on:
- the nature of staff fraud
- why staff fraud is a growing risk
- combating staff fraud
- vetting and security screening
- internal corporate culture
- monitoring staff
- effective policies for responding to identified staff fraud
- deterring fraudsters
Ben Willmott, CIPD Employee Relations Adviser and co-author
of the guide, says:
"Employers should adopt a risk-based approach to managing
employee fraud and dishonesty which is appropriate to the
organisation, the industry sector and different job roles.
While it might make sense to check whether prospective staff
have county court judgments against them for unpaid debts
before employing them in certain jobs, such as a call centre
that handles credit card transactions, it would be
inappropriate to make this a recruitment condition for
the majority of jobs or occupations.
"HR professionals have a fundamental role to play in combating
staff fraud and the associated costs. A balanced approach is
required to manage the risks while maintaining employees' trust.
This applies to the delivery of staff training and awareness
about fraud; monitoring employees to manage risks associated
with fraud; and encouraging and investigating reports of
fraudulent activities.
"It is important for employers to communicate clearly why a
policy is in place, for example on monitoring, so that employees
know that there is a clear business reason behind the approach
being taken and that it is not simply a 'Big Brother'
encroachment on their privacy.
"CIPD research shows that organisations that seek to monitor
their employees excessively are unlikely to create a work
environment that encourages trust, loyalty and commitment.
In fact employees who are closely monitored tend to have
more negative attitudes towards work and are more likely
to suffer from stress."
Research shows:
- There has been a massive rise in identity theft in recent
years. The number of victims of impersonation recorded by CIFAS
has grown from 16,810 cases in 1998 to 67,406 cases during 2006.
It is likely that organised criminals have targeted businesses
to fuel this rise substantially.
- CIFAS research indicates that staff fraud has been a growing
problem in recent years in respect of investigations, confirmed
cases, referrals and unconfirmed cases. Some organisations have
seen a 30% increase in the number of staff fraud referrals made
to the relevant fraud department in the past year.
- The value of employee fraud has risen almost 80% in 2005 from
a year earlier - and more than 200% since 2003.' BDO Stoy Hayward,
FraudTrack Report.
- In a survey by Leicester University, 70% of the 2,000 people
questioned admitted they would commit fraud, if they knew they
would get away with it.
- To download a free copy of the guide, Tackling Staff Fraud -
Guidelines for Employers, HR and Line Managers, please visit
http://www.cipd.co.uk/guides
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