PwC’s 2016 edition of the Global Economic Crime Survey revealed that almost half the incidents of serious economic crimes are perpetrated by internal parties, a cause for serious concern and attention.
Internal parties are trusted to perform their jobs with integrity, but, as shown in the PwC survey, this is not always the case. Most commonly, fraud is perpetuated by top and senior managers, finance employees, IT staff, sales and purchasing and payroll employees. And this is a global phenomenon, not just unique to South Africa.
However, in South Africa, law enforcement is not adequately resourced and trained to investigate and prosecute economic crimes, according to 70 per cent of South African respondents to the Economic Crime Survey.
When a great number of economic crimes are taking place internally and the relevant law enforcement actors are not fully equipped to help, companies are left to deal with the fraudulent actions of their employees on their own. Companies may view addressing fraud internally as a costly and time consuming affair that brings with it heightened reputational risk, which nobody wants.
Based on these factors, there is a dire need to focus on prevention, rather than cure. There are many ways that fraud and internal incidences of economic crime can be minimised. One of them, and possibly the most significant, is through thorough background screening of employees and potential employees.
A great deal of emphasis must be placed on the recruitment process. When looking to add on any candidate for any position, no matter the company, it is imperative to ensure that criteria are designed to assess their integrity in addition to their ability to do the job.
Companies are advised to run a background screening check on all candidates. With the right software, you will be able to verify their identity, credit information, criminal records and qualifications. Automated solutions allow users to do all this and a lot more, allowing you determine if potential hires are capable of fraud.
Additionally, the following tips is offered:
• Avoid complacency – never assume your company has a low risk of fraudulent activity as it can happen to any business, regardless of size;
• Study the economic landscape, its effects on the average person and how it can lead to the manifestation of economic crime;
• Ensure internal and external audits are thoroughly conducted;
• Ensure all roles and responsibilities are correctly aligned with current risks;
• Maintain a strong ethical culture within the workplace on all levels; and
• Conduct ongoing employee assessments.
Rudi Kruger is the general manager at LexisNexis Governance, Risk & Compliance division.