United Kingdom
FraudTrack - Simon P. Bevan
The overwhelming majority of fraud goes unreported despite the fact that fraud costs the UK billions of pounds every year. The reason fraud is often unreported is due to reputational concerns, with organisations choosing to manage issues in-house and steer well clear of the criminal justice system.
There are many myths and misconceptions about fraud – why it happens, the types of frauds are that are committed, which organisations are at risk and who may be a ‘fraudster’. BDO’s FraudTrack 8 demystifies many of these perceptions, with the first myth being ‘it wouldn’t happen here’. Another frequent refrain is ‘he’s worked here for years – we trust him’. Unfortunately, no organisation is immune to fraud, regardless of size, industry or loyal employees.
In fact, most large frauds are committed by long-serving employees and it is the people you trust that defraud you. And there is no typical fraudster profile despite the commonly held belief that that most frauds are committed by middle aged, white, university educated men.
Why do people commit fraud? Does it matter why? American quasi-academics will wax lyrical about the fraud triangle and motives for fraud. I would question whether knowing the answer to the motivation question takes organisations anywhere. What organisations need to know is how to reduce the risk of recruiting fraudsters and how to identify frauds as soon as possible. FraudTrack reports that greed and lavish lifestyles are the primary motivators for fraud.
Another myth is that the handling of cash is the greatest fraud risk. Organisations should take a P&L approach to fraud risk. The most significant lines on the P&L will be where the greatest fraud risk lies. If you run a call centre then your greatest risk will be around employment and IT costs. If you are developing an offshore oil field, fixed asset procurement will be where you greatest risk lies.
Implementing appropriate communication channels to ensure that your employees, suppliers and contractors are aware of what to look out for and how to report suspicious behaviour will assist your organisation in preventing the occurrence of fraud. However do not rely solely on whistleblower programs to ensure that suspicious activity is reported. If you have open door management and an integrity culture at the top of an organisation, honest employees will be your trip wires to identifying fraud.
Don’t sweep fraud under the carpet and protect your business.
- Know who you are doing business with
- Invest in background checks during the recruitment stage
- Ensure you have adequate procedures and process to detect fraud and prevent fraud
- Make it easy for your staff to report fraud – do you have a whistleblower program?
- Understand your responsibilities under the Bribery Act and set a no tolerance program for your organisation.
To request a copy of BDO’s FraudTrack report, please visit www.bdo.co.uk/fraudtrack. For more information or for a confidential conversation, please contact Simon P Bevan Partner, BDO Forensic Services on +44 (0)113 204 1286 or simon.p.bevan@bdo.co.uk.
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