Fraud detection red flags: 12 common signs to look out for

Fraud continues to be a high profile news story: in the last week, a former Ukip MEP has been jailed over £500k expenses fraud, the finance director of Bannatyne Group was in court over fraud amounting to £8m, and it was revealed that in 2014 insurance fraud was worth an incredible £1.32bn.

Fraud, or deception for personal gain or to cause loss to another party, comes in many forms, making protecting your organisation against fraud an ongoing challenge.

There are numerous risks to organisations: job applicants lying on CVs in order to get jobs, employees filing false expenses claims, and senior staff abusing their positions for financial gain are just a few examples.

As well as fraud within organisations, every individual working for an organisation is a potential target for fraudsters – and it could well be the organisation’s money and reputation which ends up lost.

Consequences

The consequences of fraud are extremely serious, including imprisonment, hefty fines and damage to reputation of both the individual and the organisation.

Fines, lost revenue and legal costs associated with fraud can lead to reduced wages, cancelled bonuses, decreased morale and even redundancies.

Our Online Fraud and Market Abuse training is designed to help protect organisations against the various threats posed by fraud by raising awareness among all staff.

Everyone in an organisation is responsible for detecting fraud and protecting the organisation from its consequences. This excerpt from the ‘Identifying and preventing fraud’ section of the course demonstrates 12 red flags to help individuals detect fraud in your organisation:

Behavioural red flags

Employees who consistently work longer hours than their colleagues for no apparent reason and are reluctant to take time off.
Employees with a sudden change of lifestyle and/or social circle.
Employees under apparent stress without identifiable pressure.
Employees who request significant detail about proposed internal audit scopes or inspections.

Financial red flags

Employees known by others to be under external financial pressure.
Employees who appear to make a greater than normal number of mistakes, especially where these lead to financial loss through cash or account transactions.
Employees with unexplained sources of wealth, or at the highest level of performance (e.g. sales) where there might be a concern that they are achieving this through suspect activity.
Employees with competing or undeclared external business interests.

Procedural red flags

Employees making procedural or computer-system enquiries inconsistent or not related to their normal duties.
Customers or suppliers insisting on dealing with just one individual.
Managers who avoid using the purchasing department.
Poor engagement with corporate governance philosophy.

These red flags are designed simply to raise awareness and help in the detection of fraud by giving employees an idea of what to look out for – they do not constitute evidence that fraud is taking place.

Our Online Fraud and Market Abuse training covers identifying and preventing fraud in much greater detail, including technology fraud, internal and external fraud, the Fraud Act 2006, the consequences, investigation and reporting of fraud.

How are you managing your GDPR compliance requirements?

GDPR added a significant compliance burden on DPOs and data processors. Data breaches must be reported to the authorities within 72 hours, each new data processing activity needs to be documented and Data Protection Impact Assessments (DPIA) must be carried out for processing that is likely to result in a high risk to individuals. Penalties for breaching GDPR can reach into the tens of millions of Euros.

“In a world older and more complete than ours they move finished and complete, gifted with extensions of the senses we have lost or never attained, living by voices we shall never hear.”