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An inside job

Member: Nifa

New research has found that more than 80 per cent of frauds are committed by someone inside the firm, such as employees or subcontractors, rather than by an unknown person.  Studies show that almost half of the most frequent types of insider activity are unauthorised disclosures of sensitive information, which could help outside parties gain financially. The research also shows that the average initial fraud loss from an insider attack on a private, public or voluntary organisation is £424,500.

However, while these figures make sobering reading, the good news is that this type of problem is largely preventable and can be quickly detected if forensic investigators are brought in at the first sign of a problem.  Potential insider fraud can be simple, such as when employees invent fictitious suppliers and submit bills from them to their employer for payment, or they can be more complex. 

For example, a long-time supplier might be in collusion with an employee or subcontractor and be inflating its invoices and submitting other unwarranted charges. While these amounts are small, over a period of many years they can grow into substantial loss to the firm but, because they don’t cause alarm at the time, they are hard to spot without professional help.

Forensic investigators are experts in this field and use sophisticated software that can spot anomalies far quicker than the human eye. Once discovered, these tiny threads can be followed until the extent of the fraud is uncovered and then extensive investigation of email trails can pinpoint who is doing what and for how long.  Moreover, if an employer engages accountants to do a forensic audit on a regular basis, any problem such as this can be detected early and nipped in the bud, meaning that a tiny trickle of lost revenue does not become a flood.

Sources: Scottish Herald, Various

Author: Roger Isaacs, 16 January 2015

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