Collusion usually only detected when profits plunge

Beyond petty theft committed by employees, bigger cases of theft or fraudoftenresult from collusion between several or more staff,usuallyassisted byoutsiders.

“And because it is so hard to detect, losses can run into the millions before it is discovered”, warns Brian Gillespie of Alexander Forbes Risk Services’ Knowledge Centre.

In fact, in most cases collusion is only detected when profits plunge.

Examples of collusion include employees “stealing goods and selling them as their own, or channelling the income from sales to fraudulent accounts” explains Gillespie.

Gillespie is currently dealing with a case where all 40 staff in a company’s warehouse were involved in theft – from the drivers and packers, to sales staff, accountants and managers.

When all staff are involved it is very hard to identify early on.

Traditionally the best way to uncover collusion was to put in a ‘sleeper’ – someone who under the guise of an employee infiltrates the colluders. This is, however, becoming an increasingly dangerous practice.

“Oftensleepers vanish after a few months, either through intimidation or by being killed” explains Gillespie.

A safer route these days if collusion is suspected is to appoint a forensic specialist to detect the theft.

“Fees paid to such specialists are often recouped through a decrease in loss incidents” advises Gillespie.That said, once a loss has happened even the best policies will not provide full recovery since the insured will be obliged to carry an excess.Furthermore,Commercial Crime policies seldom provide full indemnity for loss of sales, loss of market share or reputation damage.

Given, however, that not all cases of collusion will be detected before they have resulted in a loss, the best way to deal with the consequences of collusion is to purchase a broad form Commercial Crime cover.

To maximise protection against loss Gillespie advises companies to ensure the following extensions to any commercial crime policy:

• A limited requirement to prove improper personal financial gain
• Electronic data loss
• Third party computer fraud
• Virus cover
• Optional free reinstatement of cover
• Extortion
• No-claim bonus