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Internal Fraud Prevention – When Employees Turn Rogue

Posted by Serina Gill on 26-Sep-2017 13:50:01

shutterstock_625957112-974725-edited.jpgInternal fraud is a very real risk, but it can be a difficult one to manage. Many firms may be far more focused on external fraud and allow employees considerable responsibility to get on with their roles. Indeed, no one wants to work with someone looking over their shoulder and managers may be too busy to conduct regular audits.

Payroll, bookkeeping and having access to valuable data are all areas where fraud incidence can be higher and those who commit the crime may be far from obvious candidates – the case of Ben House being a prime example.

Downfall of a model employee
The 31-year-old was well thought of in his job as a claims negotiator for Ageas Insurance in Portsmouth. So much so, that he was a former ‘Employee of the Year’. However, he was a gambling addict and was fraudulently processing fake accident claims. Before being apprehended, House had stolen some £271,489 and he has since been jailed for four years and three months.

How he did it
House committed the fraud between August 2015 and 16 November 2016. His job involved processing motor claims and he had the authority to pay these for values of up to £4,000. However, he also obtained – without authority - his team leader’s login and so was able to authorise larger sums.

House began identifying genuine claims involving multiple vehicles, but added on additional false cars and damages through putting forged documentation onto the computer system.

He then duped his brother and sister-in-law, among others, to allow payments to be made into their accounts. He told them he was due bonuses from work and he wanted payments made into their bank accounts to reduce his tax liabilities.

House was caught when he went into work on a Saturday and logged in as the team leader. A colleague noted that work had been done at the weekend and spoke to the manager (whose log-in House had used) thinking they must be struggling with the workload.

That manager said they had not been in and so an investigation began. This soon escalated, with CCTV footage examined. The City of London Police’s Insurance Fraud Enforcement Department were also involved and House was prosecuted.

Making a fortune from false invoices
Another well-documented case is that of former Lloyds Bank worker Jessica Harper, who was in charge of online security. She was jailed for five years in 2012 over a £2.4m fraud. She submitted false invoices to pay herself £2,463,750 and gave large sums to friends and her three brothers to invest in property.

Harper said she believed she was overworked and underpaid. “I saw the opportunity and thought given the hours I work, I deserve it. If I went to work for another company I would probably be earning four times as much.”

Spotting the warning signs

There is no stereotypical fraud or indeed fraudster. They may be in senior management roles or they may have low-paid administrative positions but risk managers need to be aware incidences are common and be mindful that:

  • Fraud may involve a so-called ‘low and slow’ approach involving small amounts over a regular period to avoid detection
  • Cash is not the only target – data can also command a high price
  • There can be many motivations to commit fraud – disgruntled employees may seek to sabotage their employer’s operations. It is not just about financial gain
  • Regular audits and checks on invoices, payments and the lines of responsibility are a must

Monitoring employees may seem unpalatable and there may be perfectly legitimate reasons why a team member may suddenly appear to have far more visible signs of wealth. But allowing internal fraud also results in reputational damage – it is undoubtedly an area for risk managers to keep a watchful eye on.

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