Fraud being committed by employees during 2012, when compared with 2011, has increased significantly according to frauds recorded on the CIFAS Staff Fraud Database. The counter-fraud body pointed to:
A 43 per cent overall increase in the number of staff frauds recorded in 2012 when compared with 2011 with increases identified in all major types of fraud.
Attempts to obtain employment fraudulently (eg by withholding or falsely declaring information such as qualifications or previous convictions) doubled in 2012.
There was a 22 per cent spike in the number of dishonest actions by staff to gain a benefit by theft or deception (eg theft of cash from customer accounts).
Frauds where an organisation’s staff stole customer data for personal use have also increased.
Many organisations readily accept the damage that customer fraud can inflict, but the dangers posed by fraud committed inside an organisation often remain overlooked. With an increase of 43% being recorded during 2012, organisations cannot afford to ignore this threat.
CIFAS Communications Manager, Richard Hurley, says: “The damage done by fraudsters inside an organisation can impact upon balance sheets, customer confidence and staff morale. It can also lead to regulatory and legal punishments to organisations. The 43 per cent increase in staff fraud witnessed in 2012 demonstrates, therefore, that some organisations have invested in better protection and controls – enabling them to identify and prevent more fraud. Some of the frauds, however, demonstrate that organisations remain vulnerable. While these types of fraud are thankfully less commonplace than fraud attempts from outside an organisation, the damage that they can cause is as serious, if not more so.”
Fraudulent attempts
The main reason for the overall increase in staff fraud is a surge in fraudulent attempts to gain employment. During a period of economic and employment uncertainty, many organisations have tightened their recruitment processes; so that applications are vetted and checked thoroughly to verify, for example, that the potential employee is precisely the person who completed the application, has the qualifications claimed, etc. With the overall number of (successful and unsuccessful) fraudulent attempts increasing by over 100 per cent during 2012, the seriousness of the problem is clear, according to CIFAS.
Richard Hurley says: “The cost of employing someone who has made fraudulent declarations about their employment skills and history is more than financial. Concealed credit histories, false declarations about previous employment (such as individuals stating that they had resigned when they had actually been dismissed), false supporting documentation and even the use of fake identities have all been recorded as reasons for such frauds being recorded. This demonstrates that the same level of effort made to vet prospective customers should also be paid to an organisation’s potential employees.”
Deceptive actions
Attempts to gain benefit by deception or manipulation while in a job remained a threat during 2012, with a 22 per cent increase in cases of this kind. The most common reasons for recording such frauds are the theft of cash from either a customer account, or directly from the employer. Attempts to facilitate fraudulent applications or submit false sales figures, however, also contributed to this 22pc rise.
Richard Hurley says: “Economic hardship as a motivation for some fraudsters might generate a level of understanding, but the heartless and exploitative nature of many frauds (many of the instances relate to theft from elderly or vulnerable people’s accounts) only underlines the fact that the perpetrators’ actions have much in common with muggers in the street. While completely stamping out these kinds of fraud is very difficult, responsible employers can help to do so by sharing data on confirmed cases in order to prevent such fraudsters from simply moving on to another organisation. It must also serve as a lesson to organisations to have better support networks in place for staff who are struggling financially, so that they do not turn to committing crime within the organisation.”
Customer data
The rise in the number of instances of staff unlawfully obtaining and disclosing personal data (first noted in 2010) was followed by a decline in this kind of fraud in 2011. The year 2012 witnessed another increase, meaning that better awareness of this danger may exist but more needs to be done to combat the threat, the body suggests. This fraud type specifically relates to organised criminality, with a large number of proven cases related to staff disclosing customer data to third parties. With data-driven identity crime accounting for about 65 per cent of all frauds recorded to CIFAS’ other database (the National Fraud Database). Keep your customer data strictly controlled CIFAS warns; otherwise it could easily be used to defraud you and your customers.
Comment
Arjun Medhi of CIFAS adds: “Organisations have increasingly come to terms with the idea that the vulnerabilities within an organisation are as dangerous as those that outsiders might try to exploit. Combating these through improving controls, responsible monitoring, and sharing data and best practice in terms of prevention are therefore methods that responsible organisations are already using to counter such threats. These figures are in one way encouraging as they demonstrate that such organisations are aware of, and are identifying, those dangers and countering fraud. But it is equally clear that more must be done by other organisations to prevent their businesses and their customers from being punished from within. While it is true that most staff are honest, hardworking and reliable, guarding against the few bad apples must become an increasing priority for all organisations – otherwise the frauds highlighted here will only continue to increase.”
