It’s widely reported employees account for one-third of fraud that is committed against business. Where employee fraud occurs, this isn’t typically limited to a short time period, employee fraud is committed over a period of years. The root cause of employee fraud is typically a weakness in internal controls which the employee will exploit. These are trusted employees who operate with little management oversight or accountability and with limited separation of duties. In my experience, an employee committing fraud is identified when they are absent from the workplace and another employee identifies discrepancies, or when they leave the business and the black hole in the finances is identified.

It should be slightly better news for larger businesses, who have at their disposal data analytics that can identify anomalies or outliers in data. They also have the resources to monitor and review their employees work and can identify where fraud or unusual behaviour is being committed ultimately reducing their risk of being a victim of fraud. However, businesses, regardless of size, are not good enough at investing time and resource in identifying fraud.

So where does this leave businesses who don’t have the budget for data analytics? or who don’t have the resources to undertake monitoring and review activities, but want to stop the bottom line being affected by fraud? It’s a simple answer, a business must invest some time and resource with its greatest asset - the employee.

Employees are the eyes and ears of a business and from a junior member of staff to the executive, each one has a responsibility to safeguard the business. That the executive or senior management must promote and drive this collective responsibility, ensuring the culture is one of zero-tolerance of fraud is just one piece of the jigsaw.

Ethics is another piece. Ethical behaviour is about doing the right thing. However, some businesses rely on Ethics Policies and Statements as a marker for employees and third parties as to how fair and honest the business is. Employees tend to act more ethically when they think they are being watched. A business can have a robust Ethics Policy, but a policy is only ever as effective as the person who is applying it (or not). If a business has employees demonstrating unchallenged, unethical behaviour, this will impact on the whole business and result in a negative effect on the business culture. Employees operating in a business with a failing culture and poor ethical behaviours and standards will be highly unlikely to report wrong doing. Getting the balance of culture and ethics is key.

Most, if not all employees know what theft is. Theft is instilled in most children in their developing years as a negative behaviour and it stays with most of the population as ‘wrong’, whether inside or outside of work. Theft and fraud are sometimes interlinked but the nuances are not always understood.

One of the underlying issues for employees is ‘What is fraud?’. In my fraud awareness sessions, when asked ‘What is fraud in society? I deliver the most common examples I am provided ‘is enhancing a home insurance claim or ‘Smishing’ relating to banking fraud?’. When I ask ‘What is fraud in your business’, the most common responses relate to theft examples and not fraud. This isn’t a criticism of the attendees, it corroborates that employees know ‘right from wrong’ but they need to learn what fraud is within the area of the business they operate in. Employees need to understand the warning signs, the red flags and what to do when they are concerned.

My final point relates to whistleblowing and why investing time, resources and promoting an effective whistleblowing policy is paramount. Employees see and hear things which where communicated and handled appropriately could prevent a fraud occurring or continuing. However, where an employee is worried their concerns may not be acted upon, overlooked, or they may lose their job if they speak out, they simply won’t relay their concerns. I have undertaken countless interviews during disciplinary and criminal investigations, where employees knew the behaviour or actions of other employees caused them concern, but that did not feel they’d be protected or supported by their employer and the fraud wasn’t stopped.

Whistleblowing interlinks with the culture and ethics of a business. Where poor culture and poor ethical behaviour exists, it would be very unlikely an employee would have confidence their employer would act upon their concerns and would be unlikely to ‘speak out’.

Tags: UK200

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