The data, obtained from ActionFraud, the UK’s national fraud and cyber-crime reporting centre, revealed that businesses submitted over 800 reports to the police about employee fraud in 2016-17.
The highest level of losses from employee fraud were reported in the Met Police Force area (£7m), followed by the City of London (£4.7m) and Essex (£4.4m).
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 per cent) 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.
‘Understandably, employers want to demonstrate that they trust staff to carry out their duties, but there is a balance to be struck by making sure that sensible and effective oversight and controls are in place to prevent abuse.
‘In our experience, fraud is often carried out by employees who may have been in post for some time and who know where the weak points are. They can often be motivated by greed, lifestyle aspirations, debts or addictions.
‘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 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.