New data obtained by RSM under the freedom of information act has found that reported business losses from employee fraud have doubled in the last year.
The data, obtained from ActionFraud, the UK’s national fraud and cyber-crime reporting centre, reveal that businesses reported £88m in losses from corporate employee fraud in 2017-18, more than double the reported £40m lost in 2016-17.
In total, businesses submitted over 1,418 reports to the police about corporate employee fraud in 2017-18, a rise of 76 per cent on the previous year.
The average loss per report in 2017-18 exceeded £62,000, up from £50,000 in the previous year.
According to the Home Office fraud categorisations, corporate employee fraud is where employees or ex-employees obtain property, or greater remuneration through fraud. It also covers the misuse of corporate cards and expense systems.
Examples might include submitting business expense claims for personal expenses, creating ghost employees on the payroll or claiming overtime for time not worked.
Akhlaq Ahmed, forensic partner at leading audit, tax and consulting firm RSM said:
'Employee frauds can range from the very basic to the very sophisticated but all too often they go unnoticed and unreported.
‘It's not clear from these numbers whether incidences of employee fraud are increasing or whether more businesses are detecting and reporting their losses. However, the fact that we've seen reported losses double in a year should serve as a wake-up call to businesses that are overly complacent about fraud risk.
'With the right controls in place, businesses should be much better at detecting and preventing fraud.
'In many cases, staff have suspicions or evidence about a colleague's fraudulent behaviour, but they feel hesitant about raising concerns. Businesses should do much more to foster a culture which encourages whistleblowers to report their suspicions without fear of reprisals.
'Ultimately, if employees feel confident enough to raise concerns, companies can help protect themselves from fraud losses and any resulting regulatory or legal action.'
RSM advises companies to develop and implement an effective anti-fraud strategy consisting of four main components:
- Prevention- Encourage an ethical and anti-fraud culture, supported by education and training targeted to specific parts of the business.
- Detection -Operate strong policies with a segregation of duties and a separated authorisation process to deliver sound internal controls - particularly in higher risk areas such as procurement, IT contracts and payment process. Operate a dynamic self-review process to risk-assess changing areas of fraud, environment and vulnerability to both traditional fraud and cyber threats, publish a whistleblowing reporting route and awareness campaigns.
- Deterrence - Demonstrate a clear anti-fraud culture with zero tolerance led from the top; supported by an aggressive stance of prosecution or sanction. Publish a Fraud Prevention statement enforcing this position.
- Response - Operate a Fraud Response Plan to deal swiftly and robustly where fraud is identified using key predetermined personnel.