CONFUSION HINDERS FRAUD FIGHT: TELL ME SOMETHING NEW!

Recently my attention was drawn to the comments made by a leading think-tank that claimed a “confusing hotchpotch” of reporting obligations is hindering UK companies in their fight against fraud.

The Fraud Advisory Panel (FAP) is urging the government and UK plc to develop a more consistent approach to combating corporate fraud, which costs British businesses around £30 billion annually.

That’s all well and good. But I think to refer to a “confusing hotchpotch” underestimates the scale of the problem British businesses currently face from threats like insider and employee fraud.

Like me, all serious-minded fraud prevention professionals have been aware for a long time that corporate reporting structures need to be radically overhauled – and that senior managers need to stop sweeping cases of insider and employee fraud under the carpet.

While I welcome any steps that bring about a reduction in fraud, I would have hoped FAP would have offered some credible solutions to the UK’s growing fraud problem. For example:

·      How do companies get the police to take insider and employee fraud more seriously?

·      How do organisations prove guilt – so that the evidence is strong enough to secure a conviction in a courtroom?

·      What systems help tackle the fraud problem in a meaningful way?

FAP says UK companies who have been the victims of fraud are often “embarrassed and a little ashamed” and would rather “not re-live the ignominy, even for the benefit of the authorities”. After all, organisations often consider the protection of their corporate reputations to be their overriding priority!

The think-tank goes on to say that obligations to report fraud differ widely by industry – financial services companies must report every fraud to the FSA (but does this really happen in reality?), and pension providers must report breaches to the Pensions Regulator. But these aside, other sectors do not have the same obligations. In addition some professional and industry organisations impose voluntary fraud reporting obligations on members.

FAP also says that the role of the external auditor in detecting fraud was often misunderstood, and that external auditors must follow up evidence of fraud but do not have an obligation to look for it.

That’s all very well – but I want to hear about the practical solutions that address the problems my clients face on a daily basis!

At the moment, the best the Panel can do is call for a voluntary Code of Conduct that all companies buy into, which would see them report any material fraud to law enforcement agencies and discuss anti-fraud controls and processes at board level.

Unfortunately, I can’t see that working in a meaningful way. Personally, I don’t think a voluntary code takes us any further than where we already are.

UK businesses need to be offered practical solutions that have real bite – something, that with the minimum of fuss, they can quickly implement so that there is a tangible and positive outcome.

Or is that just naïve thinking on my part?