The People Bulletin

How do you know that the charming temp you have in your accounts payable team is not part of an organised gang of white collar criminals trained to act as opportunist accounting and payroll fraudsters?   You might find yourself relying on a mis-placed faith in the scope of your  contract with your temp agency or hoping that your internal controls will save you from the likelihood of fraud occurring in your organisation.  Businesses never like to admit they have been victims of fraud, yet the National Fraud Authority estimate that around £30bn disappears out of businesses each year, and the World Bank puts a figure on global corruption at $1 trillion. 

Speaking at the Charity Finance Director’s Group’s (CFDG) Sterl Greenhalgh of Grant Thornton’s Forensic and Investigation Services group, warned delegates that a key factor of why and how fraud goes on in organisations is the low chance of detection. ‘Most fraudsters are quietly getting on with doing a good job, and you would never suspect them. In my experience, they tend not to wear horns to identify themselves!’ he observed.

Often, it is only when a supplier complains they have not been paid, yet the accounting records reflect that they have, that the problem emerges.  What has actually happened is that the ‘operative’ has gained unauthorised access to the supplier master file. For example, this can happen by the 'operative' waiting until the employee with the relevant access authority has left for lunch with the rest of the accounts payable team), before changing the destination bank account details that has been set up for that supplier to a different account controlled by the fraudsters, before the impending BACS payment run.  Once the payment has gone through the 'operative' will look for the opportunity to access he supplier master file again and the supplier’s bank account details are re-entered.  

A similar process occurs with payroll fraud.  The payroll temp, also part of a ‘cell’ of professional fraudsters, who is perhaps standing in for an employee on long term sick leave, notices that the internal controls around adding new employees are weak and proceeds to add ghost employees to the payroll, and nobody spots that they do not actually work at the organisation until far too late.  The money has long since been spirited away.  There was one case where a manager fired a temp worker for fraud and next week noticed they were working on a different floor!

Greenhalgh told The People Bulletin:

‘Organised fraud groups are highly experienced in coaching their operatives to keep their eyes open for the main chance to commit such frauds whenever they can.  No doubt readers will also have their own stories about stolen cheques either blank or signed going missing in their organisation.  Normally, a control failure or weakness will be the root cause; in the case of the accounts payable fraud the employee did not log out or activate their password protected, screen saver before leaving their desk and the operative jumps on their keyboard before it automatically activates.  Equally, organisations may not focus on the fine print as to the extent of the agency's pre-employment screening procedure.

‘I think the biggest challenge facing the third sector with regard to fraud is that because the majority of staff work to help people, they have difficulty believing that a colleague, and it's not just temps, might be a fraudster who wants to harm their organisation.  Part of the solution is to provide bespoke training to staff so that they are alert to these risks, can recognise warning signs and have the confidence to report them on a hotline as part of a strategy to embed an ethical culture across the organisation. It is no good looking out for that staff member who is sporting a fine set of horns.’ 

www.grant-thornton.co.uk/intermediaries/forensic_and_investigation_ser.aspx