Local employers advised to be vigilant as employee fraud rises

Employee fraud can have devastating consequences for a business and as concern over disgruntled employees committing fraud rises in 2011, employers are looking for different ways in which to combat internal fraud.

According to Johan Fourie, Quality Assurance Services Manager at Lion of Africa Insurance, current economic conditions prevailing in 2011 could have a severe and negative impact on employee morale – which is one of the main contributors to increasing incidences of employee fraud.

“Petrol price increases, the rising cost of food and the impending tolls on major transport rotes are all likely to result in higher costs of living and place serious financial strain on many South African employees. If these employees do not feel that they are being remunerated fairly they may look to fraudulent means of creating income,” he says.

A global survey conducted by Deloitte in 2010 revealed that the three most common types of company fraud were misappropriation of assets (31%), improper expenditure (22%) and procurement fraud (16%). More than half of the companies surveyed (57%) said their audit department did not perform fraud risk assessment exercises to identify the risk of fraud.

Fourie warns local employers that allowing internal affairs to go unchecked could result in major financial liability for a business. It is not uncommon for fraudulent acts to run into millions especially where there is collusion amongst employees.

Fourie therefore says it is essential that companies not only protect themselves against fraud from an insurance perspective, but that they continue to focus their efforts on what happens among their own staff, as well as outside the organisation. “Companies must ensure that its employees have the knowledge and experience to identify fraudulent transactions, can act on it in time through an internal fraud line, and have effective systems at their disposal to identify fraud and deal with it in an effective manner.”

As part of learning how to identify fraudulent transactions, employees are taught to recognise discrepancies in official documents such as invoices. “With the correct training it becomes very easy to identify a fake document, simply by studying its characteristics such as font size and spacing,” says Fourie.

Some of the indicators that one should look for in terms of individuals in the organisation include high personal debt, not taking annual leave, a feeling of being underpaid, insufficient recognition in their job and a close association with suppliers.

“There is no hard and fast rule to determine whether an individual is, or is likely to, commit fraud. However, it is important to look out for any obvious signs as these can provide a way of nipping such problems in the bud at an early stage,” concludes Fourie.