PG36-37 FOOT MAR10 TALK SHOP:Footwear_Jan10_p30 04/03/2010 11:42 Page 36
Talking Shop
Fraud and Your Business
By Simon Bevan
F
raud can hit any business and as you can imagine, retail is
particularly susceptible. Whether it’s a case of staff installing
their own till while the owner was away, tycoons building a
fashion chain based on fraudulent loans and bribes, or staff
abusing the refund system, fraud is a problem, never more so
during times of economic hardship where temptation and need
are great.
It won’t be surprising then that according to the recent annual
FraudTrack report from BDO, total reported fraud in the UK stood at
£1.19bn for 2008 up 14 per cent on 2007’s figure of £1.04bn.
However, the survey only covers reported cases of fraud in the UK
at a time before the recession really started to bite. This is just the
tip of the iceberg as the total amount of actual fraud is certain to be
substantially greater.
Generally, of the investigations that the professionals carry out, less
than 5 per cent go through the criminal courts. The modest redundancies are too common and many people are just thankful of
increase in reported fraud should not be seen as the giving of any having a job. Why would they want to cause trouble by whistle
comfort to UK plc. Corporate vessels will run aground, not just blowing? More likely, they will put their heads down, work hard and
because of economic conditions, but also because they have been be thankful they can still pay their mortgage.
defrauded. This is just the beginning, more and more fraud will be
uncovered in the next two years and some of these will be stunning Getting tough
in their size.
There has been noticeable increase in custodial sentences for those
Third party problems fraudsters who have been caught and put through the criminal
justice system. The average sentence length is up by just under a
An area of concern from the report is fraud perpetrated by third quarter. In particular, the sentencing of those involved in major
parties; such as suppliers and customers. Third party fraud hit frauds (frauds with a value of £50m) has increased substantially.
£273m during 2008 – an increase on the 2007 figure of 347
per cent. The motives for fraudsters rarely change year on year – greed and
the want for a lavish lifestyle give rise to nearly two thirds of all
Examples include suppliers under delivering goods and perhaps fraud. The paying of debts and gambling problems make up the
over charging for the pleasure of that under delivery too. other usual suspects in terms of motive. Where potential fraudsters
Customers will defraud suppliers when they see weak systems are motivated by debt or gambling, the fraud that they are most
– claiming refunds when an item has been worn, using stolen likely to commit is employee theft and cash fraud.
payment methods or just simply stealing.
The demographic of a fraudster is all too familiar year on year
Some investigators have given a ‘triple whammy’ warning – males aged between 20 and 39 make up the largest group of
– management stealing from their companies, suppliers ripping off fraudsters with the second placed category being males aged 40
customers and regulatory bodies breathing down business’s necks. to 59. 80 per cent of all the frauds in this year’s survey were
This warning is now becoming the reality and it will continue to get committed by men.
worse in the credit crunch.
Top 12 Tips To Reduce Your Fraud Risk Today
Blowing the Whistle…
So what can you do to protect your business from fraud? Here is
Many investigations are started by a whistle blowing letter within a a set of pro-active measures to help organisations through these
business or organisation. 99 times out of 100, there is always difficult and fraudulent times.
something wrong at a business that has received a whistle blowing
letter yet they often cause management squirming and indecision. Motive
The advice is clear – always look into the claims made and always 1 - Be wary of false accounting. Particular attention should be paid
investigate. The whistle blower may not actually be correct but to relationships between the sales team and the customers, with
there is usually something amiss. management looking at year end sales team behaviour and the post
year end issue of credit notes.
…But making less noise
2 - Review your bonus structure. Fraudsters rationalise to
Paradoxically, whistle blowing may fall during a recession and the themselves that their performance is worthy of reward. Ensure that
reason is simple: Employees will not want to rock the boat in the your bonus structure is fair, transparent and aligned to the
sea of a precarious employment situation. Stories about behaviours you wish to reinforce.
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FOOTWEAR TODAY
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MARCH 2010 www.footweartoday.co.uk
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