Role players in the fraud prevention industry recently took part in a round-table on addressing fraud in the workplace. Hi-Tech Security Solutions gives the lowdown on some mechanisms that are proving to be effective in fighting fraud
How are South African companies managing the threat of fraud to their businesses? Are companies adequately equipped to deal with fraudulent behaviour?
Risk management specialist Trudie van der Merwe of IPAC, a company offering specialised risk and screening mechanisms says that when analysing fraud in the workplace, companies must realise that just as the workplace evolves so too does the criminal. Opportunities change and so too do the strategies of the fraudster.
Aside from the 2008/9 recession being a major contributor to the escalating numbers of fraud, theft and associated negative behaviours across all levels of the market, Trudie insists that fraud in the workplace has been as dynamic and established as any other business.
“Lack of job security has meant that people grab what they can while they are still in a company. This has also impacted on the growing number of collusion incidents,” she says. “And it is not just the employed that are committing fraud. Many people struggling to find a job will commit CV fraud, and, because this is not considered a dangerous crime, due punishment is often ignored.”
Marélize Uys from Managed Integrity Evaluation (MIE), highlights the fact that due to an ever competitive and skilled market: the more credentials you have, the better your chances. It has been a real reality check for businesses as they are faced with ever growing cases of fraudulent employees in their workplaces.
Trudie believes that businesses (both large and small), need to seriously follow up on existing and prospective employees by applying in-depth, integrated pre- and post-screening processes. “Catching a fraudster is not easy, as their crime is not always obvious,” she explains, adding that merely performing qualification, credit and licence verifications is no longer enough.
How challenging is CV fraud and how is it being addressed?
CV fraud is very common says Marélize. “We try and monitor it by reporting all fraudulent qualifications on a weekly basis to the South African Fraud Prevention Society (SAFPS). This is vital, because by sharing information on fraudulent applications with the SAFPS, we ultimately protect prospective employers from repeat offenders.”
“Sharing information on fraudulent employees is critical in the fight against encouraging repeat offenders,” agrees Danette McDonald from (SAFPS). “We recently tackled a repeat CV fraud offender who had been retrenched and was trying to find new work. Her CV was screened by a prospective employer and it was discovered that she had a fraudulent matric certificate. She was blacklisted despite having been employed previously in quite a high financial position.”
Post employment screening
According to Hendrik van Rooyen, MD of the PISA Integrity Assessment Centre which specialises in the determination of an individual’s levels of integrity through the application of various assessment instruments, such as polygraphs, and then advises accordingly, post-employment fraud is the biggest issue companies face at present.
KPMG recently produced a document profiling the fraudster, and evidence proved that the archetypal fraudster is actually a person with more than five years in a company.
“The KPMG investigations have revealed that many fraudsters acted independently and an overwhelming majority of perpetrators were not content with only one fraudulent act. Employers have to be mindful of the fact that their existing staff can actually pose the most significant risk to their operation and post-employment screening processes should be put in place to identify these risks,” he says.
True pre- and post-employment screening is actually better defined as human risk management, says Trudie. And it is not a once off process. Not all companies have welcomed the system, but they are getting there and slowly good management teams are seeing the vital need for post-employment screening as well as pro-actively coaching people about ethics.
Trudie says her company has seen a need to implement lifestyle training in organisations where, for example, employers are responsible for large bodies of security officers. All too often security officers are recruited from extremely poor, disadvantaged communities, given meagre technical training, put in a uniform and just expected to know how to behave in the workplace. Many are not necessarily criminally inclined, but they just do not know basic lifestyle skills required for their work and are susceptible to pressure from syndicates.
Trudie also believes that by looking at behavioural patterns – and not simply verifying credentials – a lot can be assessed about an employee. “All too often your high level fraudster will be a person who is not deemed necessary to undergo a credit check. That person just appears squeaky clean. It is these people that need to undergo in depth pre-employment screening in order to ascertain unusual behaviour patterns that could ultimately affect a company,” she explains.
Hendrik agrees adding that often a fraudulent employee who is managed by a fraud syndicate will be presented to the company as totally clean. Once that person is well positioned in the company, he/she will then start activating others to assist with fraud.
Privacy rights?
From a legal point of view, an employer has a right to protect his company from fraudulent activity as well as the security of his other employees. By being upfront right from the stage of signing the employment contract, which must document that screening will take place at the employer’s discretion, employees will know that they are going into an environment which has a zero tolerance for corruption.
Employers who back away from post screening processes for fear of employee dissent, have in all likelihood not fully grasped the destruction that serious fraud can cause to their company. One of the most neglected issues is the need for management to implement a well-constructed communications programme within their company. “This augments your training, capacity building and your overall communication throughout the business,” Hendrik adds. “And deep routed within this communication, should be a strong focus on integrity and honesty in the workplace.”
Hendrik says he advises clients to request that newly appointed employees sign a one-page document undertaking not to steal from the company, not to commit fraud, or to assist in it – over and above signing the employment contract.
The panel further maintained that in order to protect themselves from legal repercussions, companies must let their employees know if camera technology is installed in the building and where it is, if telephone calls are recorded, if employees are monitored as they come in and out of the building, if post-employment screening and drug testing will be necessitated if the situation arises. If an employee signs a document proving that they have been warned of the procedures and adhere to them, then a company remains on the side of the law. Furthermore, employees will know better than to take a chance with a business with such stringent controls.
Hendrik believes that by using preventative measures, and working on the conscience, businesses can manage the screening process in such a way that people are willing to identify with the programme and not see it as something that infringes on their rights. “The communications programme is the single most important aspect of managing unacceptable behaviour in the workplace.” “Companies undertaking to run integrity tests must also know their boundaries,” says Kirsten Halcrow from the Employers Mutual Protection Service (EMPS). “An employer cannot do a credit check just for the sake of it. It must be job relevant. They must also be aware that any check they do must be proven necessary and that without it the employee would be a risk to the company.”
Growth in the screening business?
Over the past two years, there has definitely been a growing awareness of the need for employment screening procedures. But according to Hendrik, whilst the growth in the number of clients has been significant, there has been a decline in the volume of work per client.
“People are spending less money and being more selective about which services they choose. Money that may previously have been spent on screening everybody applying for a position, will now only be allocated to the final stages of the selection process,” he says.
Some clients who have adopted post-screening systems have also narrowed them down or done away with them for the simple reason that the system identified senior people involved in fraudulent activity.
What trends are emerging
According to Erna Penning, 62% of companies in South Africa are currently doing assessment tests. But of this 62%, most companies are only doing the standard integrity screening such as credit, criminal and qualifications tests. They are not doing the in depth risk assessment procedures and this remains a problem. In America assessment testing is done by 85% of companies.
For those applying screening procedures in their businesses, the results are, according to Hendrik, definitely tangible. “The moment a company has a structured programme in place they will definitely see the results,” he explains. “We have a brewery client who within six months of adopting quite a comprehensive programme, has seen a drop of 92% on their losses. That is significant. Obviously the impact of screening will be more significant in certain industries, but whatever the impact, it can only be a bonus.”
Trudie says evidence shows there is no doubt that companies who have pro-actively conducted proper in depth pre- and post-employment screening are attracting better quality employees. “Fraudulent candidates know that these companies have a zero tolerance approach to fraud and will opt to go somewhere else. I strongly believe that companies save money by conducting proper pre-employment assessments.”
Who commits fraud?
It was agreed that whilst your typical fraudster operates out of pure greed, this has not been the case in the current economic climate. Financial theft has proven to be the main fraud threat to companies, motivated by the poor market.
Another fraud motivation, says Danette, is employee disgruntlement. Companies affected by the recession have had to handle their employees quite ruthlessly in order to cut back on costs. “Employees who fear retrenchment, often feel they need to vindicate themselves by getting as much out of the company as they can before this happens.”
The problem of drug related fraud is something many employers fail to recognise says Nina de Winter of MIE. “A lot of fraud is committed as a result of drug abuse,” she says. “Many employees are hooked on drugs. Someone who is squeaky clean in all other facets of life may suddenly find themselves in a world of debt as a result of their drug habit. Employees are being pushed ever harder to perform; they are expected to work longer hours, produce better results, and are eternally striving to keep up competitively for fear of losing their jobs. The striving to be bigger, better and faster pushes them into desperate ways of ‘finding an out’.”
Do trade unions cooperate?
Unions are a veritable minefield, says Hendrik. “Companies seldom engage with trade unions on screening issues because of their tendency to take up arms; but companies will get a far more proactive approach from the unions if they work with them right from inception,” he argues, explaining that a couple of weeks ago a municipality wanted to install a biometric control system and the employees went on strike. The union made an issue out of it, in all likelihood because there were no prior consultations between the parties.
“The moment the unions understand that by becoming involved in these programmes, they actually protect the interests of the majority of their workers (as opposed to the interest of a single worker), they start cooperating,” says Hendrik. “But if you do not engage with the unions they are willing to fight to the bitter end, in order to protect the single employee.”
Kirsten agrees: “The unions feel if you do not grant them their due respect by involving them in the process then why should they cooperate. If you communicate with them, however, they can be quite supportive and can land up being of benefit to the company.”
Sharing information
According to Kirsten the more companies wise up to implementing screening procedures, the more they will actually benefit each other. Companies that choose not to give references on fraudulent employees, actually impact negatively on business as a whole, she says. “Competitors need to take heed that by sharing information and references on personnel they can actually benefit each other and the industry as a whole.”
But the sharing of information is clearly a very prickly subject. It was unanimously agreed that companies are very reluctant to share information about employees for fear of repercussions and damaging their reputation in the market. The fraudster is actually being protected rather than the economy says Trudie. “Criminals hop from one company to another because legally they are not being exposed,” she says.
Managing fraud
Hendrik believes that companies need to adopt a three dimensional approach to managing fraud in the business. “First of all, you have to have your operating procedures in place and your security and screening measures should be jacked up. That is where everything starts and everything falls down. Secondly, your management should be in place. All policies and procedures and communication programmes must be in place. And your third dimension is effective investigation and reporting.”
All in all it was concluded that companies need to change their one-dimensional approach towards risk management. Unacceptable behaviour should not be dealt with as and when it manifests itself. It is now time to initiate preventive measures.
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