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Corporate fraud and insider threats

The financial, reputational and regulatory impact of having an organisation’s critical assets stolen or illegally used can be catastrophic. And the threat does not come only from intruders. A displeased or money-minded employee who has access to such information may cause a million-dollar loss. According to PwC’s 2018 Global Economic Crime and Fraud Survey, 52% of companies worldwide were the victims of fraud perpetrated by people inside organisations.

Sergey Ozhegov, CEO at SearchInform.

Let me give a few examples of real insider threats that our customers have encountered:

Confidential data leakage

The head of sales of a large auto parts retailer uploaded the supplier database and the price list to cloud storage. The risk officer found out that the employee transmitted information to her husband, who was in collusion with competitors. The company forwarded the results of an internal investigation to the operational authorities, who brought a court case against her. The estimated damage was several hundred thousand US dollars.

Insiders siphon the databases of customers, dealers, suppliers and counterparties, and this could result in a huge advantage for competitors or bankrupt a company.

Industrial espionage

An incident took place at the enterprise that produces bakery products. The risk management department found out that a manager recently employed to work with trading networks was a double agent. He got the job to have access to the company’s programs and get information about counterparties. If competitors had received the confidential information, the company would have suffered considerable damage. There would have been an outflow of customers and the total financial losses annually would have amounted to at least 200 000 US dollars.

However, in most cases, it is not necessary to hire someone to spy. Competitors simply lure your employees who would provide confidential information as an entrance ticket to a better life.

Bribery and payoffs

An employee of a development company corresponded via mail to an expert from a candidate company for general contracting. In one of the messages, the employee asked his dialog partner about the exact amount of reward if he ensured this company received the contract. The risk management department of our client found out that there was a conspiracy, the employee promoted a potential contractor for a payoff.

Employees, who accept payoffs, explain the choice by a correct market analysis, long-term cooperation or use other tricks, and at the same time, they cause material damage to a company.

Threat to business processes

The internal audit department of a design company found out that one of the employees saved the draft of the corporate charter of another company in their personal mailbox. Within a few hours, it became clear why the company was regularly losing clients at the stage of contract signing: the employee stole clients and carried out projects for less money using corporate resources.

The problem of corporate fraud is exacerbated not only by the variety of schemes, but also by the availability of corporate resources that company personnel can benefit from. For example, a fraudster, using an official position and access to a company’s database, can promote their own legal entity as a counterparty and at the same time offer disadvantageous terms of cooperation to his / her employer.

Theft

One of our customers – a chain of hypermarkets – suffered a major theft of equipment from a warehouse. During the investigation, the suspicion fell on the guard. In order to find other possible participants in the incident, the risk management department analysed staff communication. As a result, it became clear that three employees were involved in an illegal scheme: the guard, warehouse coordinator and a top manager. The conspirators paid for the damages.

To successfully conduct investigations, identify insiders and prevent corporate incidents, responsible experts need to see an objective picture of what is happening and receive alerts about incidents that require verification.

How to protect against insider threats

It’s not a problem to choose employee monitoring software, but the tools allowing you to control corporate fraud risks in real time have the advantage. Knowing about all the abnormal events in a corporate network helps to avoid negative consequences. An internal control system empowers a company to build a robust risk management process and prevent incidents with the help of:

• Detection of corporate fraud and illegal profiteering schemes.

• In-depth investigations and corporate incidents assessment.

• Protection of confidential information from leakage during its storage, use and transfer.

• Analysis of workplace morale and employee loyalty management.

• Employee productivity measurement and abnormal behaviour detection.

• Visualisation of all the events and connections within the company.

In business, as in any people-oriented process, the human factor plays an important role. Employees are a company’s most valuable, but also the most pernicious asset. Therefore, a company has only two ways: either blindly believe that all people are honest and deal with the consequences of incidents, or use tools to manage risks and control personnel, and in doing so, minimise risks.

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