Cifas – a fraud prevention trade body, last month released Staff Fraudscape: a 40-page report on insider frauds. Overall, confirmed cases of fraud by staff within Cifas – typically banks and telecoms firms – members rose by 14.5pc in 2011, compared with the previous year.
There was a 41pc jump in the number of dishonest actions by staff to gain a benefit by theft or deception. This includes the theft of cash from the customer (31pc of these cases) and from the employer (23pc). Undoubtedly, economic and work pressures provided much of the motivation for fraudsters to commit these frauds, but senior counter fraud professionals have revealed that they expect this type of fraud to pose the biggest danger to organisations.
There has been a 25pc decrease in the unlawful obtaining or disclosure of personal data – which is encouraging news and demonstrates that organisations have tightened up the control and access to data. In 74pc of these cases, data was handed over to third parties, highlighting the risk of organised criminal involvement.
Employment application frauds that have been unsuccessful (i.e. were discovered before employment commenced) dropped slightly in 2011 – down 9pc from 2010 – which is surprising in a climate where jobs are scarce. Attempts to conceal an adverse credit history (for positions where a clean credit history is vital) increased by 50pc from 2010, however, demonstrating the perilous situation that many applicants now find themselves in.
Analysis of the types of staff fraudster shows patterns consistent with those seen in 2010: for example, over 80pc of those guilty of the disclosure of personal data were below 30 years of age, and 64pc of female staff fraudsters being recorded for dishonest actions to obtain benefits by theft and deception. Internal controls and monitoring were the main ways in which staff frauds were discovered in 2011 (44pc of cases) but the low rate of whistle-blowing by staff (3pc) demonstrated that further improvements could be made by organisations in order to tackle the internal fraud problem in a robust way.
World of staff fraud
Staff Fraudscape not only presents analysis of the staff fraud patterns, but includes findings from a survey carried out by CIFAS of senior fraud prevention and HR professionals: delving further into the reasons behind the patterns. Several examples of the types of frauds discovered by CIFAS Staff Fraud Members are interspersed throughout the report.
CIFAS Staff Fraud Adviser, Arjun Medhi, says: “By presenting the analysis of patterns and frauds, together with real examples of the types of fraud recorded by Staff Fraud Members, CIFAS is able to shed more light than ever before on the precise nature of the problems faced by organisations when countering the threats from within.”
Explaining the frauds
CIFAS Communications Manager, Richard Hurley, says: “It is well known that economic and personal circumstances lead some staff to commit fraud against their employer. Equally, the links between insider fraud and organised criminal networks have been demonstrated previously by CIFAS. What Staff Fraudscape reveals, however, are the many nuances – from a 79pc increase in staff manipulating details of a customer account (frequently to help family or friends who are in financial difficulties) through to a 59pc decrease in staff stealing personal data for their own use – indicating, therefore, a higher level of criminal involvement. While the general catalysts for staff fraud remain well known, Staff Fraudscape helps to clarify the range of issues – thereby providing better intelligence and counter fraud insights directly as a result of the data sharing efforts of CIFAS Members.”
Prevention better than investigation
Arjun Medhi adds: “While the vast majority of staff are honest and trustworthy, staff fraud is a real problem that poses real and continuing risks. Staff Fraudscape lays bare the intricate complexities involved in battling fraud; balancing preventative measures against the need to treat innocent staff fairly, and the continuing evolution in the types of fraud being committed.
“The fight against fraud requires similar and continual evolution of methods, and highlights areas for increased attention while underlining also the successful steps taken by responsible organisations: from data-sharing to instilling an anti-fraud culture throughout an organisation, combined with strong internal controls. Through these efforts, the emphasis for counter fraud strategies can be on prevention, rather than investigating and learning how to deal with the consequences once the damage has been done.”
About CIFAS
CIFAS has over 260 Member organisations spread across banking, credit cards, asset finance, retail credit, mail order, insurance, investment management, telecommunications, factoring and share dealing. Members share information on identified frauds in the fight to prevent further fraud. CIFAS was the first data sharing scheme of its type in the world. Other schemes modelled on CIFAS have been set up in Southern Africa and Germany. CIFAS launched its Staff Fraud Database in 2006, which has 82 members covering 221 organisations sharing information on frauds that have been perpetrated against CIFAS Staff Fraud members. Members are drawn from the UK financial services industry, but also from telecommunications, insurance, recruitment and other business sectors.
