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Understanding Civil Fraud: How to Avoid Falling Victim to Temptation

Author: Nicola Sharp  13 February 2013
4 min read

Fraud by employees often goes undetected or unreported, for a variety of reasons. Here, we examine how it can be prevented by introducing an anti-fraud workplace culture.

The latest figures show that fraud costs the UK economy £73 billion a year. Unfortunately, that may not be the full, true figure of workplace fraud. The £73 billion is reached using data for all recorded instances of fraud. Cases that have been detected, reported and, in many cases, prosecuted. So while such a figure is big it does not include those instances of fraud that went undetected or those that were detected but never reported to an outside authority.

Fraud within a workplace for either personal gain or to help a third party will always be with us. An employee with access to sensitive company information is ideally placed to commit a fraud against their employer. Very often, an employer who detects such a fraud is reluctant to report it. Such a report, an anxious employer will argue, brings bad publicity to a company, makes it look foolish and may even jeopardise future contracts. So whether an employee has falsely reported performance indicators to gain a bonus or improved job security or has diverted cash or goods to themselves for personal gain, companies are often keen to ensure that news of the misbehaviour goes no further than the four walls of the workplace. Fiddling expenses, information theft and even the rigging of tendering for work are also matters that employers may prefer to deal with in house.
The reasons for such reluctance are numerous.

Businesses very often do not know who to go to first. Is it right to bring the police in immediately? Or should they talk to their lawyers first? Or double check things with the company accountant before taking any action? Such indecision is understandable. Firms have to come to terms with a severe breach of trust and work out just how much it has cost them financially and in terms of their reputation.

One route that some companies choose is to bring a private prosecution against the individual employee it believes to be guilty of fraud. This involves bringing in specialist lawyers, such as ourselves, to examine the evidence of fraud and assess what the likelihood is of obtaining a conviction via a private prosecution. Such legal advice can not only assist a company that wants to prosecute an employee with the minimum of unwanted publicity – it can also help prevent any further instances. At Rahman Ravelli, we advise on how to introduce, monitor and maintain anti-fraud procedures that minimise the scope for fraud to be perpetrated.

Fraud in the workplace can be costly to correct. Which is why the old argument that prevention is better than cure is truer here than anywhere else. Implementing anti-fraud policies and encouraging a whistleblowing culture can take time, effort and even a little expense. But such costs are trivial when a company stops to consider – or is given a sharp lesson in – what fraud can cost if it is allowed to develop unchecked.

Fraud in the workplace is very often down to greed. But it can be due to other factors. The pressure to do well at work, the need to meet performance targets or simply the desperate need to cling on to the job. All have been given as reasons by guilty parties when workplace fraud has been detected. Often, the person committing the fraud is able to justify it to themselves, perhaps satisfying their conscience by deciding that they are only taking what they are entitled to or acting in a way that will somehow benefit the company. Once the fraud has been committed and has gone unnoticed it is all too tempting to do it again and again. Surveys have found that around 20% of workplace fraud is carried out by people in senior positions. They are, arguably, the people who will be paid the most and, therefore, should have the least motivation to help themselves to some illegal extra benefits. But while this may be the case, they are also the ones with an overview of the company and access to the most sensitive information. It is because of this that they are ideally placed to identify the potential for fraud and the likelihood of it remaining undetected.
So what can a business do to help reduce the risk of employee fraud?
The first step is prevention. Policies must be put in place to remind employees of their obligations.to the company. Their contract or the company handbook must make it clear that any fraud will not be tolerated. A code of conduct should be drawn up, containing examples of unacceptable behaviour and stating clearly the implications of legislation such as the Bribery Act regarding corruption and fraud. Straightforward activities such as checking a potential employee’s references and their CRB status and holding regular staff appraisals can all help reduce the chances of workplace fraud.

But the most important measure is to impose a culture on the workplace that makes it clear there is zero tolerance of fraud from the top down. A whistleblowing policy should be introduced to ensure that anyone with suspicions about an employee’s behaviour can report them in confidence, safe in the knowledge that their report will be investigated and acted upon, if necessary. Devising a means of managing any detected examples of fraud is vital if a company is to act in its own best interests any time that it comes to light. At Rahman Ravelli, we are often called into companies to assess their vulnerability to fraud and make recommendations on how to instil an anti-fraud mentality into employees. Such a mentality is important but it can only be effective if the company also draws up a clear set of policies or procedures that outline exactly what should be done – and who should be doing it – if and when fraud is detected.
Fraud in the workplace will never go away. Only a fool or an optimist would argue otherwise. But a robust, pro-active approach to identifying and acting upon instances of fraud can reduce a company’s chances of falling victim to it. The price of prevention can be much smaller than the costs when fraud is detected – which is very often when it is too late to prevent any lasting damage.

Nicola Sharp C 09983

Nicola Sharp


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Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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