August the best month to catch the fraudsters

KPMG’s Fraud Barometer reveals that companies can be destroyed from within by trusted senior staff.

Over the last year, around 61 per cent of all large fraud cases affecting UK firms were inside jobs.

However, for those keen to do a spot of sleuthing, late August is a good time to stop fraudsters in their tracks.

Bosses at Yorkshire firms are being encouraged by KPMG to look out for unusual financial patterns that emerge during the summer holiday season.

The activities of fraudulent employees often come to light when they are out of the office and a colleague provides temporary holiday cover.

Forensic accounting experts at KPMG said employers should pay heed to financial discrepancies, such as unusual payment patterns or transactions that appear inexplicable to the employee covering a role.

They could be indicators of employee fraud.

KPMG’s profiling shows that the typical fraudster is male, aged between 36 and 45 and works in a finance role.

Many fraudsters have been with the organisation for more than 10 year, and occupy a senior role.

They are most likely to commit procurement or embezzlement fraud.

Vivien Osborne, forensic director at KPMG in Leeds, said yesterday: “It is a hard to swallow fact that employees are the ones most likely to be lining their pockets from fraud against businesses.

“Two key drivers for this are a desire to maintain lifestyles by whatever means, or attempts to cover up individual, departmental or business-wide under performance through manipulation of financial reporting.

“In fact, fraudulent employees tend not to take all their annual leave for fear of being found out in their absence, and are often more secretive than other employees about their work, perhaps showing resistance to having holiday cover. Even so, most will at least take a summer break and it can indeed be their undoing.”

Fraudsters often appear to be living beyond their means, and they are often reluctant to provide requested information.

Often, they are in a business area whose performance is not well understood but bucks the trend.

In many cases, they work very long hours.

Procurement fraud – which relates to the purchasing of goods and services and is one of the common forms of insider fraud – could be costing the private sector £20bn a year, according to a recent National Fraud Authority report.

Ms Osborne said: “The procurement process can provide ample opportunity for employees to commit fraud.

“Many of the cases I have investigated involve the recurring themes of diverting company funds into personal accounts, falsifying tender documents, giving inside information to friends to assist them in winning contracts they would not otherwise get, and employees showing a lack of understanding or even disregard for the procurement policies, causing mistrust and often loss.”

The forensic team at KPMG has devised a number of tips for firms who want to stop procurement fraud. According to KPMG, all staff should be trained in fraud awareness. They must understand how frauds can be perpetrated within their organisation and what action they should take if their suspicions are aroused.

It’s also a smart move to carry out due diligence on suppliers, to safeguard the organisation against potential fraudsters.