5 actionable ways to prevent employee fraud in your business

The cost of employee fraud

Natwest reports that employee fraud cost businesses £88 million in 2017/18 and it’s a growing problem. The real numbers are hard to confirm as nearly 50% of businesses don’t report fraud offences committed by employees. Firms generally terminate the employment of the offending individual and consider the matter closed. This means the number of fraud offences committed by UK employees is likely much higher than official figures.

Globally it is estimated that $4.5 trillion is lost to fraud each year. 21% of these cases cover losses of at least $1 million. With the economic uncertainty brought about by COVID-19, it is believed that fraud offences are likely to grow even more. This makes fraud a top concern for business leaders as they navigate their recovery.

Having proactive anti-fraud controls is the best way to help protect you and your business. Below we’ve outlined 5 changes you can make in your business to help yourself not fall foul of frauds.

Carry Out Qualification Checks

One type of fraud that is growing significantly is qualification fraud. Some estimates suggest that more than 1 in 5 people lie about their qualifications on their CV. People committing this type of fraud might not be stealing from you but they can still cost your business a huge amount of money. Training a hire who is not appropriately qualified and then ultimately having to replace them can cost business up to three times that individuals salary. Considering the negative effect it may have on your other worker’s morale, unexpected costs can add up quickly.

Qualification background checks can help verify that an applicant is as qualified as they say they are. There are also specialist checks that can check if individuals are registered with relevant trade bodies if necessary. Considering that 75% of university admissions staff can’t spot a fake degree, investing in qualification checks can be a great investment for businesses.

Carry Out Financial Audits

Auditing your finances on a regular basis is one of the best ways to ensure you aren’t being defrauded. External audits are the most common anti-fraud measure used by businesses globally. Having an external audit carried out can reassure stakeholders, give you market credibility and identify fraudulent transactions. External audits are generally considered better as those carrying out the audit are less likely to be influenced by senior stakeholders within the business.

If your business does have an internal audit department, you need to ensure they can operate independently. This means they can function without the undue influence of senior managers or controlling interests in the business. If they are heavily influenced by others within the business, it can hinder their efforts and potentially allow the business to be exploited.

Implement Effective Reporting Mechanisms

Having internal policy and procedures for employees to report people they suspect of fraud is essential. Many businesses only discovered that they were being defrauded because of tips from other employees. This is particularly true of smaller organisations. 47% of businesses with less than 100 employees only discovered they were victims of fraud thanks to tips from other employees.

Although having anonymous reporting pathways is helpful, most employees actually report their concerns to a supervisor or manager. This shows that it’s just as important to foster positive relationships between staff and management.

Introduce Anti-Fraud Training

Anti-fraud training is a key element in helping staff identify and report fraudulent activity. Organisations that incorporate fraud awareness training are nearly 20% more likely to receive tip-offs from employees about individuals committing fraud. Businesses can find tools, resources and training from the Association of Certified Fraud Examiners (ACFE). ACFE are the world’s largest anti-fraud organisation and specialise in providing training for businesses of all sizes.

Carry out Criminal Record Checks

Criminal record checks are a standard part of recruitment in businesses regulated by the Financial Conduct Authority (FCA). Criminal record checks help businesses in the financial sector assess whether individuals are suitable to hold certain positions where they have a large degree of control or influence over financial assets. But these checks are also a useful tool for businesses in other sectors as well.

A Basic DBS Check will reveal any unspent convictions on someone’s record. This can help identify any red flags regarding previous convictions for fraud or related activity which could potentially harm your business. If you do carry out criminal record checks it's vital that you have a policy on the recruitment of ex-offenders to ensure that you recruiting fairly.

Background screening is one of the key tools recommended by fraud authorities in the fight against fraud. But only around 50% of businesses have a background screening process included in their recruitment. One of the most common reservations about background checks is the price. But considering the cost of a bad hire, they are a negligible cost in the long run.

From qualification to occupational history checks, adverse financial to criminal record checks, Personnel Checks can help. We have decades of experience putting comprehensive screening solutions in place for businesses and public sector organisations of all sizes.

Get in touch today to speak to one of our expert advisors about how background checks can make a difference in your business. You can give us a call on 01254 355688 or drop us an email at letstalk@personnelchecks.co.uk