Fraud was the Cinderella of crimes but that's about to change
25 April 2007
Head for North Yorkshire if you want to commit fraud as the region has a paucity of fraud officers, says the latest issue of Securities & Investment Review magazine.
The May edition of the 30,000 strong Securities & Investment Institute (SII) members' magazine says historically fraud has been the Cinderella of crimes on the police priority list but that this could be about to change.
Following a government review last year a new supervisory body, the National Fraud Strategic Authority, will co-ordinate and lead fraud prevention work, with the City of London Police taking the national lead on tackling fraud.
However, says the magazine, the onus still remains firmly on the corporate world to protect itself from this increasing crime. At the recent SII conference on fraud and anti-money laundering, DS Paul Farley of the City of London Police’s anti-corruption unit warned that, despite the new government measures, police resources will remain stretched for some time to come. There are roughly 120 officers working on fraud in the City, but only about 400 officers covering the whole of the UK outside the Square Mile – compared with the 5,000 officers working the Customs and Excise.
“Do you want to prosecute to send a warning, or do you just want to get the money back? The criminal route is arduous and there are downsides to police involvement, such as adverse publicity, disruption to your core business and the cost of staff abstraction. You need to develop a contingency plan in case the police don’t take on the case “ says DS Farley.
Economic crime also includes money laundering, which concentrates the minds of compliance and regulatory officers, says the magazine, and much of their work is in areas such as terrorist funding. But, says Rowan Bosworth-Davies, associate consultant at MHA, a financial crime consultancy, “Trying to turn financial people into crime officers is doomed to failure. Trying to identify terrorist financing is impossible – if the securities organisations can’t do it, why should you be able to? One day there will be a scandal of crisis proportions, and it will be appallingly badly handled. Just don’t let it be you. This is all about covering yourself.”
The magazine says that despite the focus on terrorism financing, fraud is often still a simple crime. David Luijerink, head of fraud risk management services at KPMG Forensic believes companies often look in the wrong place for fraudsters. “There is a golden triangle: opportunity, pressure and rationalisation. Most of the work companies do is around opportunity; but the really interesting areas are pressure (whatever persuades an employee it is worth taking the risk, which could be personal debt, divorce, depression) and rationalisation (the mental juggling that allows an employee to believe the fraud is not wrong). Some 40% of employees who know of dishonesty and fraud do nothing about it. Tapping into your own people is the most effective thing you can do, “ says Mr Luijerink.
But many of the practical preventative steps would be familiar to a Victorian, says the magazine: reconciliations, segregation of duties, a strong corporate culture of openness – and a clear understanding that economic crime cannot be dealt with by the anti-money laundering and fraud officer alone.
