THREAT OF INSIDER FRAUD ON THE RISE
Employees seeking to maintain affluent lifestyles are increasingly turning to defrauding employers, and the length of the recession and slow pace of growth is only escalating the risk of insider fraud, according to specialist fraud lawyer, Mark Kenkre, a partner at Midlands firm Challinors.
"Economic commentators are telling us the economy is limping towards recovery, but agree recovery will be slow," /EM> says Mark, joint head of the Fraud & Asset Recovery 
Department at Challinors. "This slow growth, coupled with the deep recession, has caused employees to perpetrate frauds against employers as they seek to maintain the lifestyles they enjoyed prior to the recession." /EM>
Challinors' recent Fraud Survey revealed that just 28 percent of businesses are worried about their business being affected by fraud. "Interestingly, 37 percent felt the area they were likely to be affected would be by insider fraud. However, perhaps most worryingly, more than a third of these businesses do not have systems in place to detect fraud and 47 percent do not invest in training staff on how to spot fraud." /EM>
A recent report by the UK's Fraud Prevention Service, CIFAS, confirms insider fraud is on the increase. "The findings show dishonest actions by staff to obtain benefits by theft and deception in the first half of 2009 increased by 69 percent on the second half of 2008.
"Not only must employers learn to recognise the key warning signs and danger areas of insider fraud, but also need systems in place to detect and investigate incidents and implement an appropriate incident response," /EM> comments Mark.
Challinors' Arun Chauhan, Partner and joint head of Challinors' Fraud & Asset Recovery department alongside Mark, agrees: "Fraud protection in the workplace is paramount. It comes down to internal control - when there's a system in place, you can drill down to see every transaction on every level; it gives cash flow visibility and offers less scope for manipulation of figures and orders." /EM>
Arun believes companies large and small are equally vulnerable to insider fraud in the recession due to a lack of safety measures designed to prevent and spot it: "The recent Resilience to Fraud of UK PLC Survey, published by MacIntyre Hudson and the Centre for Counter-Fraud Studies, looked at counter fraud systems at 135 public sector organisations and 32 FTSE 100 companies. In its snapshot, firms' susceptibility to fraud across the economy indicates some major problems, with the FTSE companies revealed as the most at risk with 55 percent risk to capital among the companies, with a combined annual turnover of £180 billion.
"In my view, the lack of counter-fraud systems before the recession stems from a view that when the economy was good, if there were losses, they may not have been looked into as time was better spent on a profitable exercise. In good times, focus is on gaining money and little losses are overlooked. Now we are in the grips of the recession, people are desperate to achieve income levels of the profitable years and some may turn to fraudulent avenues to do so. This is why employee fraud is on the rise." /EM>
Mark adds: "The CIFAS survey revealed that in the first half of 2009, two in five of frauds were identified through internal processes and audit procedures, highlighting the importance of having the correct internal systems in place to increase the chance of the employee being identified before the effects of the fraud are too great. Implemented and managed properly, workplaces can become less vulnerable. However, if the employee slips through the net, we are well placed to recover the monies taken from the employer via the Court process." /EM>
In the second in its series of Insider Fraud briefings, Challinors will examine the practicalities of seeking recovery of insider fraud through proceedings, at a Breakfast event on Thursday 4th February 2010, featuring guest speaker Mohammed Zaman, QC at St Philips Chambers, Birmingham. For more information, visit: http://fraud.challinors.co.uk.
Challinors has offices in Birmingham, West Bromwich, Wolverhampton, Halesowen and Nottingham. The firm has 25 partners and over 100 fee earners, and is ranked as one of the top legal firms in the West Midlands, being Number 1 in the Chambers UK Directory in a number of categories, including Clinical Negligence. For more information about Challinors, visit: www.challinors.co.uk.
