Managing Your Cash Flow

Advice on being proactive to safeguard against fraud in the workplace

6 min read

03 September 2015

With evidence showing that fraud is committed by employees at every level of the business, expert Aziz Rahman outlines the steps you can take as a business owner to make sure you are not stung by fiddled expenses or diverted funds.

Figures vary, but the various surveys tend to estimate the cost of workplace fraud to UK companies at somewhere between £70bn and £110bn a year.

Unfortunately, that may not even be the full, true figure of workplace fraud. Estimates often use data for instances of fraud that have been detected, reported and, in many cases, prosecuted. They cannot quantify the unreported instances of fraud.

Fraud within a workplace is always likely to be with us. Employees with access to sensitive company information are ideally placed to commit fraud against their employer. Often, an employer who detects fraud is reluctant to report it for fear of bad publicity. In such cases, the need to see someone prosecuted may eventually be replaced by a determination to prevent it happening again – leading to the introduction of thorough anti-fraud measures.

When it comes to the workplace there appears to be three most common types of fraud. While there is no common league table of fraud offences, these three offences would appear to be the main title contenders; mainly because they are the easiest to carry out by a number of people within a company. 

First of these is the fiddling of expenses claims so that an employee can claim back more than their genuine out-of-pocket expenses. It can go on in most businesses and can be carried out by a wide range of staff. In many firms there is almost an unspoken rule that over-claiming expenses is an unofficial perk.

The second major instance of fraud is the making of false representations. This is most likely to apply to sales and promotional staff. It can take the form of either making false claims about a product to a potential customer or the altering of sales figures in order to claim a commission or bonus. 

Third is the opportunity for those in accounts to “help themselves” by diverting some company money to themselves illegally and covering their tracks.

Read more about Fraud:

When such cases come to light, firms have to come to terms with a severe breach of trust and harm to finances and possibly reputation. Fraud in the workplace can be costly to correct. Which is why the old argument that prevention is better than cure is truer here than anywhere else. 

Implementing anti-fraud policies and encouraging a whistleblowing culture can take time, effort and even a little expense. But such costs are trivial when a company stops to consider – or is given a sharp lesson in – what fraud can cost if it is allowed to develop unchecked.

Fraud in the workplace is very often down to greed. But it can also be due to the pressure to do well at work, meet targets or simply to cling on to the job. And once it has been committed and has gone unnoticed, it is all very tempting to do it again. 

But don’t think that fraud is only carried out by the more lowly levels of staff. Surveys have found that around 20 per cent of workplace fraud is carried out by people in senior positions. They are usually paid the most and should, therefore, have the least motivation to act illegally. Yet they have the overview of the company, access to all the most important information and the ideal position to assess the likelihood of fraud going undetected. For such senior figures, issues of bribery and corruption, misrepresentation of a company’s financial standing and tax obligations must also be given a great deal of attention.

To prevent fraud, a code of conduct for staff that lists what is unacceptable behaviour and states the legal situation regarding corruption and fraud, is a starting point. Checking closely a potential employee’s references and their CRB status, holding regular staff appraisals and introducing a whistleblowing policy are also straightforward and effective anti-fraud measures.

If companies are unsure exactly how to proceed, legal firms that specialise in business crime can be hired to assess vulnerability to fraud and make recommendations on how to introduce anti-fraud procedures and instil an anti-fraud mentality into employees.

Fraud in the workplace will never go away. Only a fool or an optimist would argue otherwise. But a robust, pro-active approach to identifying and acting upon instances of fraud can reduce a company’s chances of falling victim to it. The price of prevention can be much smaller than the costs when fraud is detected – which is very often when it is too late to prevent any lasting damage.

Aziz Rahman is founder of Rahman Ravelli Solicitors.