Insider fraud on the increase

Analysis of the staff frauds filed during the 12 months from July 2008 to June 2009 reveal some interesting shifts in the frauds identified by Members of the CIFAS Staff Fraud Database.

The effects of the recession are clearly demonstrated by the number of frauds filed by CIFAS Staff Fraud Members during the 12 month period to June 2009. Cases filed for ‘Dishonest action by staff to obtain a benefit by theft or deception' (for example, the falsification of expenses or time sheets and targets) increased by 69% in the first six months of 2009 (when compared with the last six months of 2008). This demonstrates that, as the effects of the recession cut deeper, more people are turning to fraudulent activity that they would not have considered before. In contrast, this is counterbalanced by a dramatic reduction of 74% in the number filed for including serious falsehoods in application information or supporting documents. The scale of the reduction reflects the drop in vacancies and recruitment activity throughout the economy, however, rather than a change in morality.

Commenting on this, CIFAS Chief Executive Peter Hurst notes: "As the economy improves, the challenge for public and private sector employers will be how to weed out the people who apply for the new jobs, who are willing to do anything to escape from unemployment even if that means providing false statements about their employment histories and qualifications."

The gender gap

Of particular interest, in the 69% increase of dishonest actions by staff, is that the number of women filed for this reason during the first half of 2009 more than doubled when compared with the last half of 2008. CIFAS Staff Fraud Adviser, Arjun Medhi, comments: "Fraud is traditionally seen as more of a male activity, but the cases filed this year by CIFAS Staff Fraud Members prove that this difference has been eroded by the recession. As wallets and purses get squeezed, it is surprising to see how many more women feel compelled to attempt fraud against their employer."

Fighting against fraud

The ways in which staff frauds are being identified also reveal some interesting trends:

In the last half of 2008, customer warnings accounted for just over 1 in 5 cases filed to the database. The first half of 2009 has seen this increase to just under one third of all cases filed: showing, beyond doubt, the vital role played by customers.

In the first half of 2009, 2 in 5 frauds were identified through internal processes and audit procedures, demonstrating the continued importance of business having robust checks in place.

The role that staff can play in preventing fraud taking place inside a company cannot be overestimated. It is vital for businesses to adopt formal processes to encourage those who witness fraud in the workplace (before customers or internal audit procedures might spot fraud) to step forward without fear of reprisals.

CIFAS Staff Fraud Adviser Arjun Medhi states: "Anyone who thinks that stopping fraud inside a company is an impossible task will need to examine these trends. The importance of customer awareness - regarding the running of their accounts and identifying transactions that are not theirs - and robust internal controls will always make the workplace a hostile environment for fraudsters."

CIFAS Chief Executive, Peter Hurst, concludes: "While it remains true that most employees are completely trustworthy, these figures do show that the impact of the current recession has been severe. Desperate times do, indeed, lead to desperate measures, and businesses need to put in place all possible controls to ensure that they, their employees and customers are not subjected to fraud risks that can be avoided."