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We’re bombarded daily by obvious external fraudsters claiming to be our bank or HMRC offering to give us refunds and rebates etc.  Perhaps that’s why we often overlook the risks that surround us, particularly those right under our nose.

Over the years we naturally build up a level of trust with employees, and that sometimes leads to essential controls and processes becoming too relaxed.

Unfortunately within the last few months, some of our clients have been on the receiving end of fraudulent acts from both inside and outside their businesses. Thousands of pounds have been taken, and sadly their most trusted employees have often been at the heart of the problem.

Recent cases have included the following situations:

  • An employee paying ‘Mr Bogus’ on the company’s purchase ledger, with funds going into their own personal bank account.
  • Identity theft where a genuine supplier’s identity was stolen and its customers were advised of new bank details for future payments.  Our client acted in good faith and paid their next month’s payment to the fraudster.
  • Stock shortages due to staff theft, and “doing foreigners” in their own time
  • Fictitious employees being set up on the company’s payroll.

What is often overlooked is the upsetting aftermath caused by these incidents. The loss of a key employee can put a business under a great deal of pressure, not to mention the exhaustive police investigation, disciplinary process and general distraction.

This news (and stark reminder!) may be a good opportunity for you to review the existing processes and controls in your business.  In particular, it’s good practice to:

  • if possible, have more than one employee responsible for each function in your business
  • review your monthly management account against your budget and thoroughly investigate any unexplained or unexpected variances
  • don’t sign off expenses or payments when you are in a rush, take the time needed to check everything carefully
  • ring back anyone who notifies you of a change of bank details, to confirm it’s genuine
  • have a clear fraud policy and include it within your terms and conditions of employment
  • take up references for new employees and actually speak to the referee if you can
  • be alert to changes in behaviour, such as employees being defensive or not taking their holiday entitlement.