South West businesses report £5.2m in losses from employee fraud

Latest News | Legal | South West
Akhlaq Ahmed, RSM

New data obtained by RSM under the freedom of information act has revealed that businesses in the South West of England reported more than £5.2 million in losses from corporate employee fraud last year.

The data, obtained from ActionFraud, the UK’s national fraud and cyber-crime reporting centre, revealed that businesses in the South West submitted 66 reports to the police about employee fraud in 2016-17.

Nationally, losses from employee fraud amounted to more than £40m.

Internal or employee frauds occur when fraud is committed against the company or organisation a person is working for. Internal frauds can include payment fraud, procurement fraud, travel and subsistence fraud, exploiting assets and information or receipt fraud.

According to recent research from CIFAS, the not-for-profit fraud prevention membership organisation, almost half (47%) of internal frauds are discovered as a result of internal controls and audit. However, a growing number of frauds are coming to light as a result of staff raising concerns with line managers, or via whistleblowing channels.

Akhlaq Ahmed, forensic partner at leading audit, tax and consulting firm RSM said: “The levels of reported employee fraud and the resulting losses are already high, but this is likely to be the tip of the iceberg. Sadly, a great deal of employee fraud goes unnoticed and unreported, and businesses are simply not doing enough to prevent losses.

“To counteract the threat, companies should take proactive measures to monitor payments. They should also ensure they have up-to-date whistleblowing procedures in place and a culture that encourages staff to be confident reporting their concerns.

“Unfortunately, we have seen examples recently in which poorly managed whistleblowing incidents have been ignored or where whistleblowers have been exposed or criticised.

“Embedding an effective whistleblowing culture is therefore heavily reliant on the right tone being set from the top. Ultimately, if employees feel confident enough to raise concerns, companies can help protect themselves from fraud losses and conflicts of interest in addition to any resulting regulatory or legal action.”

RSM advises companies to consider the following preventative measures:

Allocate a transparency champion or whistleblowing champion

Implement training programmes across all levels of the organisation including at board level

Develop clear policies, processes and reporting which support good governance

Deliver an independent investigation service to review and investigate concerns

Introduce an independent whistleblowing hotline for employees to report suspicions of unethical, illegal or improper conduct

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