Staff Fraud – have you thought about the risk?

As conveyancers we are all very aware of the threats associated with clients, from money laundering, to husbands ripping off wives through to the issues associated with complaints. You name the external risk and conveyancers have generally thought about it.  We put a tremendous amount of effort into trying to minimise these issues.
As an ex panel manager I have visited and talked to hundreds of firms over the years.  Reading a new report today has made me think about the risk management that I have seen.  Many firms seem to gloss over the risk of “trusted” staff and recruitment generally in the conveyancing sector.  Yet staff have suffered in the recession, some have debt they can’t service others have faced pay cuts but most have access to sensitive client data of one form or another.  A mixture of circumstances may exist that potentially encourage fraud.
CIFAS is a not for profit organisation with 265 members describing itself as “the UKs Fraud Prevention Service”.  It has just published a lengthy report called “The Internal Betrayal” which raises some interesting questions for all conveyancing organisations.
The Internal Betrayal contains a number of articles on key areas, including:
The projected increase of 62% in 2010 in the number of cases of staff unlawfully obtaining or disclosing personal data. This increase follows a 113% increase recorded in 2009 and worryingly points to a link to organised crime and the increase in identity fraud,
How to identify motivations for committing fraud with a view to its prevention,
An examination of the data analysis techniques that organisations can use to identify staff fraud,
Demonstrations of background checks on staff and job applicants, the importance of having, and following, a whistleblowing procedure, and defining and dealing with corruption,
Tracing the changes recently recorded in people’s attitudes towards fraudulent expenses claims, and
An analysis of staff fraud cases and how to instil an anti-fraud philosophy in an organisation.
Some points that conveyancer might consider include:-
Organised crime organisations are encouraging and training people to join businesses that hold and have access to personal data that they can use fraudulently.  Conveyancers at times may hold credit card details, bank details, dates of birth, mortgage account numbers.  Conveyancers should consider that they are at high risk of organised crime placing people into their businesses.  You should at all times be vigilant.
Organised crime is using the details of real people from facebook, linked in and other social media sites on the internet to steal potential employee’s data.  CV’s should not be taken on face value.
The motivation to commit fraud is complex and studies indicate that it is unlikely just to be greed that drives staff to commit fraud.  Other motives include debts, concealment of error, coercion, threat, blackmail, malice, addictions etc.  Do all conveyancing firms deal adequately with these issues if they arise with staff?
Staff that have been with you for years may have been committing fraud and not been caught.  Just because they have been with you a long time doesn’t mean you should assume their circumstances haven’t changed.
Your general controls should be as sophisticated as the modern world.
Controls as to who has access to data should also be considered.  As an example I have recently been involved with a firm where any member of staff could take the details of a clients credit card details and were encouraged to write them down and then pass them to their accounts department to take a disbursement payment.  Could this data be copied?  Could it be resold?  The firm in question saw no risk that staff may do this or any need for an audit trail.
In light of these issues and others that the CIFAS report identifies CIFAS suggests that you reconsider:-
1.       Your recruitment policy of all staff
2.       Your internal procedures
3.       Your management processes
Many firms are so busy dealing with the day to day issues of management that they fail to see the practical and real potential opportunities that they create for internal fraudsters.  When I have challenged a number of firms about the risk I have regularly been told that “we trust our staff and they would never do that to us”.  Well I have seen that it does and this report highlights the many ways that it might happen.
If you are open minded enough to consider that your staff might not all be as virtuous as you think maybe you should seek an independent view before you regret it.  The author Chris Harris also acts as an independent and experienced consultant who has experience with how firms get themselves into trouble.  If you wish to ask him questions about this please email him at [email protected] or call him on 07983 485490.
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