The term “corporate fraud” has two possible meanings. It can be the fraudulent offence either conducted by a company or a fraudulent offence committed against a company. A corporation can conduct fraud through various means to protect itself against audits and to enhance its reputation in the industry. Alternatively, a corporation can fall victim to the fraudulent activity of its employees in the form of asset misappropriation, corruption and financial statement fraud. Therefore, an organisation needs to be aware of how to follow the correct business conduct to avoid fraud.

How can corporate fraud occur?

Corporate fraud has increased in recent years due to the expanding size of corporations and the increased opportunities which allow corporations to push the boundaries. It can present itself in the following forms:

– In Accounting: Corporations and its employees can doctor the account documents. This is sometimes done with the purpose to conceal the business’ losses.

– Tax: Corporations can evade tax by withholding certain information about the company or through utilising loopholes.

– Assets: Asset misappropriation is a common form of corporate fraud, with around 80% of corporate crimes originating with doctoring of assets.

According to Forbes, corporate fraud occurs most commonly in the IT and computing industries, because there are more outlets to cover fraudulent activity. The US Securities and Exchange Commission (SEC) found within their research that a corporation’s chief executive officer and chief financial officer are involved in around 89% of corporate fraud cases. Within these studies it was also discovered that one of the most successful techniques used to create corporation fraud is not providing the correct revenue or expense documentation, whilst also overstating the company’s assets. Thus, the bodies which should be used to audit a company’s conduct, cannot do so properly because they have been given doctored information to work with.

Enron was a US based energy, commodities, and services company, who were found guilty of dishonest business practice which amounted to corporate fraud. Enron covered up its debt through creating false statements and destroying financial documents which could incriminate them. In the end this deception totalled $2 billion. In October 2001 the Enron scandal heightened and the corporation fell bankrupt, leading people to refer to Enron as the biggest audit failure. The US Securities and Exchange Commission (SEC) conducted an investigation into the fraudulent and corrupt activity which had been escalating within the Enron Corporation. The executives who were involved in the fraudulent activity of Enron were found guilty of destroying financial documents and doctoring of documents which were required by the SEC for the investigation, and therefore they were imprisoned.

How can an organisation prevent fraudulent activities by their employees?

The Annual Fraud Indicator 2017 has published research which states that in relation to fraud in the UK, from October 2017 to March 2018, 62% of the reports to Action Fraud were from businesses, and 39% of reports were from individuals. This highlights that businesses experience a lot of fraud scares within their sector and consequently there needs to be a crackdown on this.

Association of Certified Fraud Examiners (ACFE) conducted a report which examined fraudulent activity within organisations and found that on average it has taken 18 months for such activity to be recognised. In that amount of time a company can lose a lot of money to a fraudster, so organisations should have a robust anti-fraud system in place.

Organisations should know their employees well enough to spot any behavioural changes which could suggest that they might commit fraud. For large organisations it is hard for the management to monitor the changes in attitude of every employee, therefore in-depth screening should be taken when an employee joins the business to analyse whether they have any motives to commit fraud. Then, amongst employees your organisation should establish a reporting system which would hopefully set the precedent that if any strange behaviour does occur, management will be notified.

Controls should be implemented to best protect the assets of a company. There should be minimal opportunity for an employee to commit fraud and corrupt the assets of a company. For example, if you segregate duties then this will contribute to internal controls and reduce the risk of fraud; if any individual does not fulfil their role or does something strange and out of the ordinary, this will become apparent. Furthermore, documentation of everything conducted within the business should be completed and kept safe, to ensure employees cannot alter documentation or destroy it to satisfy themselves.

Corporation fraud is common. Whether it is conducted by the organisation itself or by the employees, it is still a fraudulent offence and all individuals should be aware of it when it has occurred.

Benefit fraud is the conscious act of claiming a benefit which you are not legally entitled to. This can be achieved through either lying about your personal information or failing to inform the government regarding a change to your situation. There are a vast range of benefits which an individual can claim, and therefore benefit fraud is widespread and common. The huge financial cost which benefit fraud inflicts upon the UK government has led to a crackdown.

Benefit Fraud:

The welfare state in the UK has established a number of different types of benefits to help British citizens who are struggling in different areas. The Department for Work and Pensions (DWP) are responsible for recognising when benefit fraud has taken place and have published recent studies which expose that benefit fraud cost the government approximately £900 million from 2008 to 2009.

Benefit fraud can be committed by an individual either lying or failing to present vital information which is required to make the decision about whether an individual qualifies for a UK benefit. This type of vital information includes:

– Household income

– Savings

– Whether they live alone or with a partner who contributes to the household income

– The number of properties or land that an individual owns

If an individual lies about any of the above information or fails to document a change in any of the above information, then they will face penalties which include:

– A loss of the benefits that were being claimed for up to 3 years

– Repayment of the money which has been dishonestly claimed across several years

– Prosecution and time in prison

– A criminal record which will affect movements in the future

– A fine of up to £5,000 which can be imposed instead of a criminal record

There are exceptions where, even if an individual has committed benefit fraud, certain benefits cannot be stopped:

– Child benefit

– Child tax credit

– Council tax benefit

– Disability living allowance

– War pension mobility supplement

However, if you do commit benefit fraud on one of the above benefits which cannot be stopped, the other benefits which are claimed can be stopped.

In July 2018 a former Conservative Councillor from Fylde named Albert Pounder, 74 years old, was found guilty of benefit fraud. Pounder was convicted of £10,000 claimed through disability benefit fraud, which he was not qualified to claim for. This vast amount of money had been claimed by Pounder from 2014 to 2016. Preston Crown Court found Pounder guilty of two charges of benefit fraud as they found that he should not have claimed benefits as he was not entitled.

In 1995 Pounder claimed that walking was a big difficulty for him and that he could not complete a 50-yard distance without falling breathless, requiring assistance with walking, washing and essentially living. However, CCTV in 2015 of Pounder offers evidence that Pounder could walk with ease, even whilst conducting manual labour lifting tables.

The Department of Work and Pensions are skilled in investigating suspicious benefit claims, and if found guilty an individual will be subject to the penalties. Geraldine Thomas, 54, was recently found guilty for making fraudulent claims of income support, employment support, housing benefit and council tax. Thomas had been claiming benefits in all of these areas for five years, allowing her to gain up to £41,000 from the government, when she was not entitled to any of this money. Despite lying and claiming she lived alone, Thomas had lived with a partner since 2011, who also contributed to the household income. At Newport Crown Court Thomas was sentenced to a 12-month suspended sentence and an order to retrieve the money and assets amassed from the claims.

Benefit fraud is a common form of fraudulent offence. If you are suspicious of an individual committing benefit fraud you should report this to the Department of Work and Pensions.

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Fraud is a criminal offence conducted through dishonest practice with the intention to gain a benefit for the fraudster. Accordingly, the consequences for fraud offences are taken seriously and implemented rigorously. The administered consequences increase in relation to the offence which has been committed. Severe fraudulent crimes can be subject to harsh repercussions, such as long-term prison sentences, which are in alignment with the UK Fraud Act 2006. Therefore, understanding of the UK Fraud Act 2006 is of the utmost importance.

What are the different penalties which could be enacted?
In the UK, if it has been decided that an individual is guilty of a certain type of fraud, then there is more than one consequence that they could potentially face:
1) They could be issued with a caution. Therefore, this is the cautionary measure.
During the interview stage in which an individual is being accused of fraud, if that individual admits to the fraudulent offence and co-operates with the relevant body that is interviewing them, then they might be issued with a cautionary warning.
This warning will be decided and issued by the relevant council, as it has been their decision not to pursue this fraudulent offence through a court. This caution, because it is conducted by a council and the Department for Work and Pensions, is not on the same level as a police warning, and it leaves no criminal record. However, the warning is recorded on the UK national database.
Cautionary warnings are only administered to fraudulent offences which are lower down the risk spectrum.
2) Administrative Penalty
This is a fixed penalty administered by the relative council and takes the form of a fine. The fine is decided in relation to the benefit overpayment from the offence, and therefore the fine is either 30% of the payment or 50% of the payment. This fine is expected to be paid in addition to the benefit overpayment from the offence, so it can be a costly sum in the end.
This penalty is decided upon as the appropriate course of action to take by the council, instead of referring the offence to prosecution. If the individual refuses to pay this fine or cannot pay this fine, then prosecuting the individual will be taken into consideration.
3) Prosecution
For the most severe fraudulent offences, prosecution will be chosen as the necessary consequence. Usually the prosecution process will take place at the magistrates’ court, but the most serious cases will be heard at a Crown Court. These cases will be publicised in order to name and shame those who have committed fraud, in the hope that these examples will deter individuals from committing fraud such as this in the future.
How does the UK Fraud Act 2006 treat the consequences of fraud?
The UK Fraud Act establishes the consequences which can be related to a fraudulent offence section by section, setting the premise that each offence is dealt with differently. It does establish that one of the most severe consequences is a 10 year imprisonment. Therefore, the UK Fraud Act has re-defined the consequences which had been established in the previous legislation, the Theft Act of 1968, which was vague.
In July 2018 the year-long case at Liverpool Crown Court came to an end as David Barton Senior, 64, was sentenced to five counts of fraud, three counts of theft, false accounting and the transfer of criminal property. Barton had for eighteen years committed fraud and theft to the disadvantage of elderly victims in Barton Park Nursing Home, Southport. Eventually, Barton’s fraudulent and corrupt activity was discovered when he attempted to claim the right to £10 million worth from the estate of an elderly resident following her death. Therefore, he was found guilty of dishonesty following his years of stealing from elderly residents. Liverpool Crown Court decided to imprison Barton for twenty-one years and Rosemary Booth, the care home manager, has been imprisoned for six years on three counts of conspiracy to defraud due to her involvement in Barton’s activities. Liverpool Crown Court’s sentencing here is intense as it has dealt with a severe case of fraud.
The consequences of fraud increase in relation to the severity of the offence and thus individuals and organisations should ensure all of their conduct is fair and ethical, to avoid any repercussions.

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As a victim of fraud, you have the potential to suffer crippling repercussions, which can assume the form of financial and reputational damage. If you suspect that fraud has taken place, report it straight away so you have the best opportunity of mitigating the consequences. In the UK, there are many bodies that have been established with the purpose of cracking down on fraud. It is essential for individuals and organisations to be aware of the necessary steps of reporting fraud.

Action Fraud

The UK’s National Crime Agency (NCA) is a national law enforcement agency which was established in 2013 as a non-ministerial government department. The NCA directs those who are looking to report fraud to the UK’s Action Fraud organisation, which is classified as the national reporting centre for fraud and cyber-crime.

Action Fraud is the essential body which can be used to offer advice and information on fraudulent offences. Action Fraud is conducted by the City of London Police, who are the UK’s policing lead when it comes to economic crime. The City of London Police also work in conjunction with the National Fraud Intelligence Bureau, who are responsible for assessing the reports which are filed with Action Fraud.

When it comes to reporting fraudulent offences to Action Fraud there is either an online fraud reporting tool or a telephone number for individuals to call and talk to a fraud adviser. These tools are at your disposal thanks to Action Fraud and therefore they should be used if you are slightly suspicious of fraudulent activity. If it is fraudulent activity which you have suspicion of in your business, then you can call a different number which is available 24/7 to help you solve this problem.

However, recently in August 2018 there has been some criticism of Action Fraud. Criticism of Action Fraud’s retrieval and answering of calls has been referenced, as it has been discovered that Action Fraud have taken twice as long to answer phone calls than HM Revenue & Customs recently. It has been suggested that Action Fraud take up to 11 minutes to answer their phone calls, whereas HM Revenue & Customs supposedly take 4 minutes. This means that Action Fraud have only answered 68% of their calls during their core hours of 8am to 8pm. This criticism has resulted in customer dissatisfaction, especially considering these calls are of high importance.

National Crime Agency

The National Crime Agency (NCA) work with multiple other agencies, all with the purpose of cracking down on economic crime in the UK. The Serious Fraud Office (SFO) and the Financial Conduct Authority, as well as international bodies, have all worked in conjunction recently to aid the process of reporting fraud and the subsequent investigations that follow.

Project Bloom, which is a project established to combat pension fraud and scams, is led by the NCA but also involves the Department for Work and Pensions, the Serious Fraud Office, the National Fraud Intelligence Bureau and the Pensions Regulator. All these bodies are responding to the fraud reports made to Action Fraud; there is a long process of investigation following a report made to them.

There is plenty of advice and help out there for suspected fraud. If you are ever slightly concerned or suspicious that fraud has taken place, always report the incident to Action Fraud in order to help crackdown and prevent fraud from occurring.

Due to the serious repercussions that can follow fraudulent activity, such as financial loss and reputational damage, it is important that you detect fraud as soon as it has occurred. There are many different forms which fraud can take, and we are required to be vigilant of all of these forms. There are safeguards which can be implemented into businesses to flag when fraud has been attempted or has occurred. Fraud awareness training is essential if an individual wants to detect fraud effectively.

What is Fraud?

Fraud is a conscious, illegal activity with the purpose of deceiving another individual or organisation in order to create a financial gain for the perpetrator. Fraudulent activity can be prevalent in the business world, as fraudsters attempt to deceive others to benefit their own jobs or their respective organisations. The sectors within the business world which experience fraudulent offences most commonly are:

• Insurance
• Finance
• Real Estate
• Investment
• Even as an individual at home, you are also vulnerable to fraud. Fraudsters can victimise individuals through:
• Identity Fraud
• Credit Card Fraud
• Benefit Fraud

Therefore, considering that individuals and companies at large are all vulnerable to the activity of fraudsters, it is essential that we decide what the red flags are to detect fraud before it is too late.

What are the red flags which can be used to detect fraud within an organisation?

There are some specific signs which can be used to detect fraud, but overall a simple change in behaviour which seems suspicious can be a red flag to detect fraud.

1) Accounts. Analyse the changes within your accounts. Can the changes be justified by employees or is there something suspicious about the fluctuations?

2) Documentation. If documents are going missing regularly or if there is some evidence of tampering with a document, such as the alteration of figures, this can indicate that an employee has a vested interest in altering the data in this document, perhaps for fraud.

3) Company purchases. If excessive purchases seem to be occurring, especially to new suppliers that the organisation hasn’t dealt with regularly before, it could indicate that an employee is exercising fraud through company payments.

4) Inventories. Fraud can take place through altering inventories. If there seems to be a drastic loss of inventories, this can indicate that some doctoring has occurred.

5) Invoices. The number of invoices processed by a company does fluctuate; however, if there are extreme changes in the volume of invoices then it suggests that the individual responsible may be altering the invoices to cover fraud.

What are the red flags which can be used to detect fraud at home?

As an individual you can become a victim of fraud due to fraudsters gaining access to your personal and financial information in a variety of ways. This can be daunting and therefore it is important to be aware of the signs which allow you to detect fraud.

1) Watch your accounts. Make sure that you analyse the changes in your accounts. Has there been a financial transaction which you don’t remember authorising yourself? If so, contact your bank to find out the details of this transaction.

2) Keep an eye on accounts opened in your name. Has there been a financial or online account opened in your name which you did not open yourself? If so this is a sign that a fraudster has gained enough of your personal information to create an account in your name.

3) Notifications regarding changes to your accounts, such as password changes. If you are contacted regarding a password change for one of your accounts which you did not create, it suggests that a fraudster has conducted this change.

The premise of detecting fraud rests upon the fact that as individuals and as organisations, we all need to be vigilant. If something seems to be suspicious, always investigate it, just to be sure. Fraud awareness training will also help organisations to collectively identify and detect fraud before it is too late.