Regardless of size, territory and business sector, all organisations
are vulnerable to fraud. Fraud can take many forms – including
the theft of cash, stock and other assets; forgery, embezzlement
and computer crime – and can continue for many years, often
discovered purely by chance.
The financial impact on a business can be devastating, but what is often overlooked is the resulting threat to your business processes, how it erodes the integrity of your employees and tarnishes your reputation.
A company’s first line of defence against fraud is its internal controls and procedures. But no matter how robust a company’s controls are, they are only as effective as the individuals who are operating them.
We have access to a wide range of Crime insurance products that would provides extensive and flexible coverage for a broad range of fraud risks. In the face of ever-changing fraud exposures
Crime Insurance is designed to be an allrisks policy covering:
The finance manager of a UK recruitment company was responsible for processing and authorising salary payments to employees through the company payroll system. He also made additional payments from company bank accounts into his own personal bank account at regular intervals. There was little or no supervision of his work and the lack of internal controls enabled him to defraud his employer of more than £200,000 over an 18-month period.
An employee of a European subsidiary of a UKbased company advised its suppliers that the company had changed their bank details and directed them to make all future payments into a newly advised bank account – which happened to be the personal bank account of the fraudulent employee. The same employee also filed expenses claims for bogus accommodation costs and misappropriated insurance premiums. The total loss to the company was £76,000
A financial controller used his company credit card and PayPal account for personal expenditure. He received the card statements, checked the amounts were correct and paid them. No independent checks were carried out on his spending. He also misappropriated cash, receipts, and overpaid himself. Lax controls and no supervision of his work, meant that over three and a half years the financial controller managed to spend £71,000 of the company’s money on personal expenses. The fraud was discovered when he was on annual leave and the managing director reviewed the company credit card statements and noticed some erroneous transactions.
An employee responsible for processing refunds for a specialist retailer took advantage of their role and began processing fictitious refund transactions to his personal credit card account and other fictitious accounts he had setup in other people’s names. An accounts clerk noticed that there had been an unusually high number of high-value refunds processed through the company’s credit card terminal and online banking. The company then discovered that over a three-year period, 340 separate refunds had resulted in an £87,000 fraud. Lack of basic controls meant that the employee acted with full authority to process refunds without daily checking.
The employee responsible for all stock-related issues at a UK manufacturer removed considerable amounts of stock from the company’s production site and then altered the accounting records to avert discovery. The stock levels were manipulated at the times of the monthly stock audits with the assistance of suppliers. Stock would be left on site during the stock takes and then removed after it had been counted and supposedly verified. As the individual knew exactly when the stock checks would take place, they were able to ensure the correct amount of stock was in place to be counted. The company suffered a loss of £1.4m in misappropriated stock.
Companies need to be rigorous about enforcing their anti-fraud measures. While no measures can guarantee fraud prevention, the following checklist is intended to offer general guidance and may assist in helping an organisation to develop a fraud prevention and mitigation plan.
Understand and review high risk and key operations such as:
Fraud response plan:
particularly in the following areas: