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Employee fraud


Don't be vulnerable to fraud from within


Fraud isn’t always a threat from outside. Without the right internal systems and controls, your business can be exposed to a threat from within.



While the majority of employees are honest and trustworthy, a company with weak internal processes and controls will be vulnerable to the risk of fraud from within. This could even involve a trusted member of staff.

The main risks

Staff fraud doesn’t just cover theft of cash or property. Employees may also routinely provide goods and services to friends and family without authority. An even more serious problem is the theft of confidential information, intellectual property and customer data – including pricing or tendering figures.

There is clear evidence that, in some instances, organised criminals will attempt to place individuals inside an organisation. Their aim is to obtain confidential information or commit fraud, now or at some time in the future. Call centres, IT departments and warehouses are all popular targets. Existing staff may also be tempted or coerced into providing information to a criminal third party.

You need to ask yourself - does your business have effective controls to safeguard all company assets, including customer data and intellectual property?

What to look out for

  • A new member of staff who resigns shortly after joining.
  • Any reluctance by an employee to take holiday entitlement.
  • Any indication that a member of staff may be experiencing financial difficulties.
  • Customer complaints regarding missing documentation or unrecognised transactions.
  • Unusual changes in an employee’s behaviour, personality or business performance.
  • A sudden change in an employee’s lifestyle, unexplained wealth or a standard of living beyond their apparent means.
  • Members of staff who consistently under-perform or exceed targets.
  • An employee’s unusually close relationship with suppliers or contractors.
  • Suppliers or contractors who insist on dealing with the same individual.

Recruitment checks

A dishonest employee could operate independently. Alternatively, organised criminal groups could place – or bribe – people in your business.

That’s why it’s vital to have a robust and effective recruitment policy:

  • Get documentary evidence to confirm a prospective employee’s name, address and right to work in the UK.
  • Obtain a detailed employment history and, where possible, validate previous employment details, questioning any apparent gaps in the history.
  • Request and check references.
  • Validate the applicant’s qualifications.
  • Carry out enquiries with credit reference and fraud prevention agencies.
  • When an employee turns up for work on the first day, check that they are the same person who was interviewed.

Temporary staff

Make sure any employment agencies carry out pre-employment screening to the same standard required by your business. Many companies also run periodic post-employment checks.

Business controls

  • Control access to buildings and systems using unique identification and passwords.
  • Restrict and closely monitor access to sensitive information.
  • Have clear segregation of duties, particularly for staff authorised to set up, amend or make payments for the business.
  • Use tiered authority and signature levels for payments.
  • Never sign or authorise payments that do not have all necessary supporting paperwork. Make sure that you compare underlying paperwork with each payment to verify that it has been initiated for legitimate business purposes. In particular never sign blank cheques.
  • Regularly reconcile bank statements and other accounts.
  • Periodically audit processes and procedures.
  • Promote a culture of fraud awareness among staff.
  • Adopt and make clear a zero tolerance policy towards employee fraud.
  • Have a clear response plan in place when fraud is discovered, to help maintain morale of staff and customers who are not involved.

Action Fraud, the UK's national fraud reporting centre provides information for businesses to help prevent fraud.

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CIFAS, the UK's Fraud Prevention Service also provides advice and information on preventing staff fraud.