Dealing with a fraud incident

Beagle: Hunt out what needs to be done to protect yourself from fraud

What happens after you have been defrauded or someone has tried to defraud you? The police, as we all know, are overworked and unless your loss is in six figures and about the best they might do is give you a crime number for your insurance company.

Philip Yorke, first Earl of Hardwick and the Lord Chancellor and Keeper of the Privy Seal, said in 1759: “Fraud is infinite and the fertility of man’s invention can contrive new schemes to elude any tightly drawn law.” I suppose that is as true today; as fast as we can contrive schemes to defeat fraudsters they seem to find ways around them.

Fraudsters may come from anywhere, but the ICT sector is probably under more threat than most. Undoubtedly, some are opportunistic but programmes that allow employees to 'take ownership' of their company using share options and other extra benefits designed to encourage loyalty may be part of the problem. Some people believe that ‘taking ownership’ may encourage people to help themselves, as it were.

The first thing is to stay calm and take stock of the situation. Do not start the blame game, for that may backfire. Ideally, you will have a fraud response plan already, but if not, you need to decide quickly how you wish to recover your position and identify the perpetrator.

Decide who is going to be responsible for leading the investigation and to whom the matter should be reported. A decision needs to be made on how the evidence of the crime should be secured without alerting the suspect and in a form admissible to the civil as well as the criminal courts.

You will require an understanding of how to deal with employees who may be or are under suspicion, and you will need knowledge of, or guidance on, how to interview witnesses and suspects.

If you wish to involve law enforcement, or outside experts, consider when you should do this. Bear in mind that the local police may not be equipped to deal with fraud or even interested if the amount is under a magic £750,000.

You will also need a plan for dealing with the press, if they should become involved.
Also, how does one recover stolen assets?

It should be remembered that investigations post-event can be expensive, so the earlier they are notified to an investigation source the less expensive they become, as less resources are required.

Trail of clues

It is well known that every single fraud case will have a trail of clues and red flags providing sufficient evidence to indicate that something was amiss at an early stage. Not surprisingly, this is only of use if companies and departments have the processes, training programmes and, above all, the interest and inclination in trying to prevent the problem.

Around two-thirds of company fraudsters are motivated by greed and the desire for a lavish lifestyle. Studies have shown that approximately 11 per cent of crimes are linked to gambling habits by staff and committed to pay off existing debts.

Honest employees may not wish to ‘tell tales’ on colleagues. Most will say they would wish to blow the whistle but would be wary of doing so, for fear of recriminations such as being ostracised by colleagues or harming their career prospects.

Managers commit about half the corporate frauds appearing in court.

The acceptance that you are likely to be targeted goes some way towards protecting yourself. Doing nothing is no longer viable as, given the current legislation, you may find yourself being prosecuted as a result.

If you do have fraud prevention and response plans, do make sure they are up to date and reflect the needs of your current business model. Ensure your staff are fully aware of their responsibilities and keep training and retraining them. If you are attacked -- whether successfully or not -- go back to the plans and see if you need to make any changes and plug any holes.

Lastly, get involved with a group that covers fraud prevention. This will help you keep updated with the latest tools and techniques. It is also a place to share experiences.

Such a group is the Fraud Prevention Forum (FPF) The cost of joining such organisations can be offset against the training, knowledge and networking you will receive and if you are able to avoid one successful attack, you may get an excellent return on your investment.

Laurie Beagle is divisional director at P &A Receivables Services