Employee dishonesty: do you know your staff?

Important lessons can be learnt from the “Employee Fraudscape” report recently published by CIFAS, the UK’s Fraud Prevention Service.

According to its research, employee fraud is as prevalent as customer fraud, with perpetrators becoming increasingly imaginative. CIFAS recorded a 71% increase in unsuccessful fraudulent attempts to obtain employment.

These involve individuals submitting false information as part of the recruitment process (such as incorrect qualifications or falsified credit histories). The second most widespread fraud is employee dishonesty (such as stealing cash or making false expenses claims). These constitute 40% of all internal frauds recorded.

So what should employers and HR departments do in light of this report?

1. Make sure your anti-fraud procedures and controls are well-drafted and properly implemented. They need to be constantly refreshed.

2. Create a fair and consistent culture of accountability. It is dangerous to have one rule applying to management and another for lower grade employees. Be alert to fraud among senior managers, often regarded as the most trusted and loyal employees. A culture of resentment can build if rules are not consistently applied.

3. Recognise fraudsters’ motivations and combat them. The report highlights certain triggers including peer pressure, work-related stress, lack of career progression and alcohol or drug problems. Helplines, training, staff support services and good whistleblowing policies can counter these motivating factors.

4. Just because an employee has been with you for a long time does not mean you can relax your vigilance. Although employers often feel confident they can spot ‘a bad egg’, this latest report suggests otherwise.

5. Act upon the discovery of dishonesty in the workplace swiftly and effectively. This sends a clear message to staff that such behaviour will not be tolerated. Follow a proper investigation and, if appropriate, a fair disciplinary process.

And what of some employers’ understandable wish to ‘brush things under the carpet’?

According to the report, hiding problems, staying quiet or downplaying fraud can be counterproductive. Of course, things may not be simple. Sometimes there can be good reasons for shying away from public exposure. Factors to consider include the severity of the fraud in question and the identity of any victims.

This may be a small defined group such as a family or a handful of investors. Alternatively, it may be that members of the public or other interested third parties have been affected, making it impossible to conceal the fraud, quite apart from mitigating the potential reputational consequences.

The message is clear. In spite of the improving economy, employee dishonesty is on the increase, and it needs to be proactively managed by employers. 

Richard Fox is head of employment and Francesca Lopez is an employment lawyer at Kingsley Napley.