How prominent is business fraud?


Business fraud is a growing issue in the UK. In recent weeks, three senior Tesco employees have been charged with one count of fraud by abuse of position, plus one count of false accounting. These alleged acts of fraud resulted in Tesco suffering a devastating four billion pound drop in the company stock market value, as well as a 263 million pound overstatement for the company.

We spoke with DPP Law’s Roger Posener to get an expert opinion on internal business fraud, along with advice on what you can do to prevent it in your company.

Internal fraud

In 2013, internal fraud made up just under half of all business fraud, according to the Annual Fraud Indicator Report. Internal fraud can be anything from a cashier intentionally cashing up wrong for financial gain, to senior level embezzlement.

Internal fraud can be prevented by not allowing fraudsters into the business in the first place. This may sound obvious, but you’d be surprised to hear how many companies fail to perform the appropriate checks when hiring a new employee.

The following steps will help you, as a business owner, to be aware of a dishonest potential employee before they enter your company.

How to spot a dishonest potential employee

Catching a fraudster before they have the opportunity to take money from your business through fraudulent means is essential. There are a variety of ways that you can spot a dishonest potential employee, these include:

  • Asking for evidence of the qualifications mentioned on their CV. For instance, if they state that they have a degree, ask to see their certificate. If they are unable to provide evidence of their qualifications, retract any offer of employment.

  • Perform background checks, including police checks, on any potential employee.

  • Always follow up references.

Ways to spot and prevent internal fraud within your business

There are a range of ‘red flags’ that could appear if internal fraud is taking place within your business. If you spot one of these, it’s important to investigate – it could save your business thousands of pounds.

One of the most obvious signs of internal fraud is missing funds within your business. This could be entries for expenses that should be less or shouldn’t be there at all, or should be less than recorded. To stop this from happening, it’s worth re-evaluating your staff set-up.

There shouldn’t be just one person in charge of your business funds and if money is going missing, don’t be afraid to question those responsible for your company’s finances. If they can’t give a believable answer and there is evidence that the funds have been taken fraudulently, it’s time for disciplinary action.

Missing documents usually go hand-in-hand with missing funds. A good way to prevent documents going missing is to organise periodic report audits, as this will ensure that any company bank statements are delivered to you directly.

Also be wary of employees who, according to the time recording system, seem to spend long hours in work. If the work they are producing does not reflect these long hours, this could be a sign that they are clocking up more hours than they are actually working. If this occurs, politely let the employee know that you are surprised at the lack of work being produced, compared with the amount of hours they are putting in. Letting a potential thief know that you are watching them is usually enough to stop a fraudulent employee in their tracks.

No company can ever be completely immune from business fraud. However, the risks can be reduced significantly if you keep an eye out for red flags and adapt a strict screening process for new employees.