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Fraud committed by staff inside an organisation makes headlines far too often. In 2011, Members of CIFAS recorded a 14.5% increase in cases of staff fraud when compared with 2010.

This type of fraud can damage businesses reputation, brand and staff morale – as well as losing thousands of pounds. Employers must be on their guard when vetting prospective employees and ensuring that appropriate controls and a zero tolerance culture exists within their organisations to ensure that staff fraud cannot prosper.

• There has been a massive rise in identity theft in recent years: from 77,500 cases in 2007 to over 113,000 cases in 2011, with organised criminals frequently targeting insiders within an organisation in order to obtain the personal data needed to commit this crime.

• CIFAS Members’ data sharing efforts have revealed the most common way for staff frauds to be identified are through an organisation’s own monitoring and controls – demonstrating the important role that effective management plays.

• The value of reported fraud, as revealed in BDO Stoy Hayward’s Fraudtrack report rocketed to more than £2bn in the UK in 2011, representing a 50% increase on 2010’s figure of £1.4bn.This means that since its launch in 2003, when fraud totalled £331m, there has been a seven-fold increase in the cost of reported fraud.

Countering the threat

CIFAS – the UK’s Fraud Prevention Service and the Chartered Institute of Personnel and Development (CIPD) have launched free guidance to help employers understand the threats associated with fraud and help HR professionals manage the risks.

The guide, Tackling Staff Fraud and Dishonesty – Managing and Mitigating the Risks, offers advice on the nature of staff fraud, how and why the risk has increased and how to combat it, along with advice on:

• vetting and security screening
• creating an anti-fraud corporate culture
• monitoring staff
• effective policies for responding to identified staff fraud
• deterring fraudsters.

Preventing staff fraud is better than recovering from it

Arjun Medhi, CIFAS Staff Fraud Adviser, says: "The majority of staff within any organisation are trustworthy and honest. But businesses must understand the scale of the threat posed by the small proportion of staff who act dishonestly and defraud their employer and the numerous ways in which an organisation can be targeted.

“The way in which organisations approach the issue of staff fraud is changing to respond to the increased risk. Many organisations have historically been anxious to play down the threat from within and focus, instead, on the fraud risks presented by customers. The days when the majority of cases would be handled quietly with no publicity are long gone however, with customers and shareholders wanting to know that organisations are doing all that they can to safeguard against the threat.”

Mike Emmott, CIPD Employee Relations Adviser, comments: “Employers should adopt a risk-based approach to managing employee fraud and dishonesty which is appropriate to the organisation, the industry sector and different job roles. It is also vital that counter fraud teams engage with HR departments as a balanced approach is required to manage the risks while maintaining the trust of the vast majority of honest employees.

“CIPD research shows that organisations that seek to monitor their employees excessively are unlikely to create a work environment that encourages trust, loyalty and commitment. So, it is important for employers to communicate clearly why policies are in place, so that employees know that there is a good reason behind the approach being taken and that it is not simply a ‘Big Brother’ encroachment on their privacy.”

View the Tackling Staff Fraud and Dishonesty – Managing and Mitigating the Risks guide