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Tom Muleya – Fraud Insight
In the previous article, I looked at how preventive fraud training is key to minimising incidences of fraud in Business or work place. The continued skills upgrading or orientation on matters of fraud places management in a strategic position and sound state of preparedness to deal with ongoing internally motivated fraudulent activities.
A criminologist, Donald Cressey, in explaining why it is so often trusted employees commit fraud, propounded that: Trusted persons become trust violators when they conceive of themselves as having a financial problem which is non-sharable, are aware that this problem can be secretly resolved by violation of the position of financial trust, and are able to rationalise their behaviour to themselves. (Cressey, 1973). It is therefore an undeniable fact that in any Business, some unruly employees are secretly swindling their employers.
Given the prevalence of fraud and the negative consequences associated with it, efforts should therefore be focused towards methods aimed at decreasing the motivation, restricting opportunity and limiting the ability of potential fraudsters to rationalise their actions. Employers may take the following steps or reinforce them if already in existence;
Pre-employment screening
Never employ at face value, background checks with previous employers is essential. This should be coupled with a Police clearance prior to appointment. If the appointment is internal, where possible conduct life style audit and need assessment.
Segregate duties
The employer should ensure that no single person can initiate a transaction, authorise a transaction, execute a transaction and have custody of the resulting asset. This will minimise the temptation of potential offenders to steal and then cover up their criminal acts.
Conduct job rotation
Where possible, is an effective way of reducing the opportunity for employee fraud or theft, since so often this depends on the exploitation of perceived weaknesses in the system’s internal controls. If the work environment is changed regularly, you reduce the likelihood of any weaknesses being identified.
Exercise extreme care when recruiting personnel for sensitive positions. Remember when a wrong decision is made and a criminal is appointed, it is a sure case that the business will suffer substantial loses. As an employer, you may consider taking the applicant for a Polygraph test for lie detection.
Ensure employees go on leave. Employees who never go for a holiday may be ensuring that their constant presence keep a fraud from falling apart.
Closely monitor high risk business areas. The timely detection of fraud depends largely on close monitoring and surveillance for compliance with the established procedures and systems. The employer should ensure that financial transactions are supervised on day to day basis by responsible officials.
This improves accuracy of records and serves both as a detection and prevention measure. Independent staff should authenticate and validate financial transactions and records.
Promote whistle blower concept within the company. There are people who may know fraudulent activities going on within the company but because of unclear reporting mechanisms, may decide to keep quite. Ensure there is a clear reporting mechanism for speed relaying of information.
Conduct both periodic and surprise checks. While checks may be conducted on certain fixed times, sporadic checks should be conducted. This will both deter and detect acts of fraud at their infancy before potential offenders rationalize their criminal acts.
Get empowered by Fraud insight and be part of a solution to fraud scams. Watch out for the next issue on fraud scams on workplace fraud.
For feedback, WhatsApp line: 0772 764 043, or e-mail:[email protected]. Tom Muleya is a Detective Assistant Inspector working under the Criminal Investigations Department. Harare.
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