The term 'Prevention is better than cure' is a well-known proverb in the anti-fraud industry used by fraud specialists when demonstrating that it's easier to stop fraud happening in the first place than to repair the damage after it has happened.
This is of course very true and many industries across the UK should aim to put preventative measures at the top of their corporate governance agenda when securing the gateway to fraud that may threaten their finances and their reputation.
Most measures that businesses put in place are based on having robust controls in place and usually involve double checking business systems and work activity. Measures based around the human resource policies are inherently different. They are based on employing trustworthy persons in the first place and encouraging them to be loyal.
Every job applicant should be asked to provide a range of information which can then be subjected to extensive examination by those trained to do so.
This process can include:
- Extracting independent references from a job applicant's most recent employer.
- Verifying their creditionals such as qualifications and professional memberships.
- Undertaking appropriate disclosure checks on criminal convictions.
- Checking credit ratings.
- Anything else within reason that gives an insight into whether the person appears honest and reliable.
Only information that is gathered reflecting an applicant's true representation will allow businesses to employ persons who are less likely to be a threat to their organisation.
Vetting of course is not a one-off process undertaken when a new member of staff is being employed by a business. It should be seen as an ongoing, routine process or when situations dictate further checks should be undertaken. Nonetheless, prevention of fraud at the 'root cause' will always be the best measure businesses can take to protect themselves against the threat.
Unfortunately, not all businesses secure the gateway to fraud with many falling foul of fraudulent schemes that could and should have easily been prevented had they ensured that effective vetting procedures were put in place.
Only last month an Aberdeen oil executive, stole more than £1.3m from her employers whilst she was acting as vice president of finance, for a firm which provides equipment for North Sea projects. The fraudster had full oversight over the company's finances. It was also claimed that she had the trust of her employers.
Incredibly, the oil executive, had a previous conviction for embezzlement. Whether her former employer had full knowledge of this fact is unknown but it would seem unlikely that an employee would be employed in this type of role with financial responsibility given her record.
Whilst vetting is clearly a vital control in the fight to prevent fraud occurring, increasing the perception of detection is another effective fraud prevention measure. This means that all staff should be aware that their business is actively seeking out information concerning internal theft. This can be achieved in several ways such as fraud awareness training, regular audits and effective whistleblowing arrangements.
Investing in fraud prevention by introducing anti-fraud measures such as robust vetting checks or whistleblowing reporting arrangements is undoubtedly cost effective. Suffering preventable fraud and spending significant finances on investigating, prosecuting and recovering the financial losses is most certainly not.
As a wise old proverb states, an ounce of prevention is better than a pound of cure. Businesses should heed the warning.
For more information contact Sean McAuley, Fraud Services Senior Manager, firstname.lastname@example.org