Although senior managers or board members who have worked with a company for more than 10 years may appear the most trustworthy of personnel on the surface, they are in fact the biggest corporate crooks.
According to a report entitled ‘Who is the typical fraudster?’ published by auditors KPMG after analysing 348 cases of white collar fraud across 69 countries, the average criminal is male (87%) and aged between 36 and 45 years old (41%).
They are also likely to have been employed by their organisation for more than 10 years (33%) often in a senior management or board position (on aggregate 53%) and could well work in the finance function or in a finance-related role (32%). In the UK, personnel are even more likely to have worked for their employer for more than a decade (57%).
Richard Powell, KPMG’s forensic investigations network lead for Europe, Middle East and Africa, said: “Often long-serving and more senior employees will be better able to override controls and have accumulated a good deal of personal trust, so will be less suspected. They are most prone to committing embezzlement and/or procurement fraud (just over 50% of the 348 cases).”
Examples of common activity in this area include false billings by a supplier to fund kick backs to a senior employee, personnel accepting bribes from a contractor in exchange for signing off inflated project costs and colluding with suppliers on overbilling.
The most common methods of detecting fraud, meanwhile, were whistle-blowing and anonymous tip-offs (24% globally and 34% in the UK); management reviews (16% globally and 22% in the UK); customer or supplier complaints (8% globally and 6% in the UK) and questions raised by third parties such as banks, tax authorities or regulators (6% globally and 11% in the UK).
But there were also typical ‘red flag’ warning signs of trouble, which included employees who rarely took holiday, who led lifestyles beyond their current means or who were secretive or unwilling to provide requested information.
Surprisingly, however, although some 56% of frauds in 2011 had one or more red flag signs attached, only 10% had been acted upon compared with 2007 when 45% showed red flag signals and just over half were acted upon.
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Lack of recognition?
Lack of engagement with the company, the brand and its future direction could be a contributing factor in some long serving staff cheating their employer. Ongoing reward and recognition programmes are crucial in creating and maintaining employee engagement. Such schemes make clear to staff that management acknowledge their efforts and contribution to the business and instill in everyone a sense that they are working towards a common goal, thereby reducing the likelihood of fraud.