How to fight fraud

A recent spate of internal fraud cases has placed renewed emphasis on recruitment and staff screening.

Since the global economic downturn began, the threat of fraud by a company’s own staff has been hinted as a likely result of squeezed finances. Andrew James Ward’s incarceration in August for expenses fraud committed against his former employer Aviva, and the jailing of former Barclays Bank employee Wesley Gabriel in July for selling confidential account information, are just two of the most recent examples of the problem.

CIFAS, the UK’s fraud prevention service, says internal fraud increased by 45% between 2009 and 2010 and there has been evidence for many years supporting the idea that staff in general seem to disregard the importance of internal fraud. For example, a study by Leicester University in 2003 found that out of 2,000 people interviewed, 70% would commit fraud against their employer if they thought they could get away with it.

Insurers, banks and other financial institutions have to place more trust in their staff than many other types of business. In these environments, individuals regularly handle very large payments as premiums and claims are reconciled through the books or customer account data is accessed and changed.

So what factors should risk managers consider when engaging in the human resources battle against internal fraud?

1 Know your employee

Pre- and post-employment screening should become standard. Any falsehood on a job application can affect a candidate’s ability to fulfil the role. Also, if a new employee commits fraud or another criminal act and it turns out that a reference check could have stopped the business from hiring that candidate, the employer can be held liable.

2 Be transparent

The company’s recruitment policy, job advertisements and application form should specify which pre-employment screening checks will be carried out. You will also need written permission from candidates to contact their former employers. However, irrespective of whether you have permission, some employers only release a restricted amount of information to negate their potential liability in claims from former or new employees. Restricted confirmation is better than nothing and at least you will know whether the candidate actually worked for their stated former employers. Remember that unexplained gaps in an employment history could also indicate periods detained at Her Majesty’s pleasure.

3 Be appropriate

The level of employee screening should always be established following a risk assessment of the work environment and the risks associated with the job in question. A screening policy should be implemented that should include post-employment screening - both at periodic intervals and when employees are promoted or transferred to new roles.

4 Dig deep

In some instances it may be appropriate to dig a little deeper and, for example, ask to see proof of activity for each month of a certain period. If there are periods of non-employment it is wise to seek appropriate documentation such as (in the UK) Department for Work and Pensions correspondence in relation to unemployment, travel visas, flight tickets, card receipts, written evidence on headed paper of voluntary work, and so on.

Scrutinise educational and qualification certificates carefully. Don’t accept poor copies and contact the issuing institutions to check dates of study.

5 Be aware of applicants’ rights

In certain environments such as healthcare, criminal records checking is considered to be proportionate due to the potential risks involved but it is important to have a policy in place that governs the handling of disclosure information and the recruitment of ex-offenders.

According to the UK’s Rehabilitation of Offenders Act 1974, criminal convictions should not automatically preclude employment, and the discovery that an employee has a previous conviction should not automatically result in dismissal. All candidates should be encouraged to provide details of their criminal record at an early stage in the application process and they should be reassured that criminal record disclosure information will only be seen by those who need to see it as part of the recruitment process.

For certain roles, such as senior management and finance, it may be appropriate to undertake a credit history check and, again, confidentiality reassurances should be given. Staff involved in recruitment should receive adequate training in the screening process, their legal obligations and how to interpret and manage the results of these checks.

Jane Peters is head of operations for Avertis Risk Solutions