Fraud in the workplace

Fraud in the workplace 1

The business dictionary defines fraud as an “Act or course of deception, an intentional concealment, omission, or perversion of truth, to (1) gain unlawful or unfair advantage, (2) induce another to part with some valuable item or surrender a legal right, or (3) inflict injury in some manner.”

Fraud at the workplace is an ever-present threat. From impersonation, forging of academic credentials to secure employment to outright theft of an organisation’s assets, the threat fraud poses to an organisation’s wellbeing cannot be overemphasised.

Why then do people commit fraud at the workplace? One of the theories advanced to explain this phenomenon is Cressey’s Fraud Triangle Theory (FTT). According to the theory, for fraud to occur, the following three components must be present:

  1. Opportunity
  2. Pressure
  3. Rationalisation

The model, however, has exception for fraud that occurs where a person secures employment with the primary aim of defrauding his employer. Such a person then is referred to as a ‘predatory’ employee.

Opportunity arises due to a lack of or weak internal control systems to deter fraud. For example, not screening the staff of a jeweller’s boutique at the end of the workday as they leave one’s premises. As such, an employee noticing this may see this as an opportunity to make away with some pieces of jewellery by concealing them in her handbag.

Pressure is the incentive afforded to an employee to commit fraud. It includes dire financial difficulties at the personal level and vices such as drug abuse or gambling and which typically require a lot of money to sustain them.

Rationalisation is the justification for committing fraud. This justification may be triggered by the need to get back at one’s employer for a perceived injustice or the conviction that the cash being stolen cannot dent the organisation’s fortune. A culture of corruption and dishonesty at one’s workplace may also provide the justification to engage in fraud.

That said, fraud does not occur in a vacuum and its commission may be obvious, more so, at the administrative level in the organisation. Red flags to watch out for with regard to possible commission of fraud include inflated invoices that do not match market realities, preference for a particular supplier for no apparent reason, a senior employee insistence on not taking his accumulated leave or dealing with a particular account or an employee living beyond his means with no explainable other stream of income.

To minimise or eliminate fraud, an organisation needs to develop strong internal systems to deter the practice. This includes due diligence, conducting proper employee screening at the point of hiring, and routine audits of the organisation’s accounts and assets, preferably by a reputable external auditor to eliminate collusion. Other measures include job rotations at the senior administrative level or transfers in the case of government agencies or a large organisation with several branches. Organisations dealing with sensitive documents or stock such as land registries, banks, jewellers and transit companies may also install closed circuit television (CCTV) and tracking equipment to monitor the activities and movements of their staff.

Organisations need to draft detailed fraud and corruption manual. Contained in the manual are the definitions of fraud and corruption and appropriate punishment for those who engage in the vice- at the organisation’s level and which ties in to the laws of the land. The manual also has to outline the red flags to look out for as well as detailing the procedure for reporting actual or suspected fraud. Of course, it has to be explicitly clear that whistle-blowers are adequately insured against victimisation for their reportage. Lastly, the virtue of honesty has to trickle down from the top management to the employee at the lowest rung of the organisation’s ladder. The same too has to be expected of one’s clients and suppliers to eliminate the culture of fraud.

Editor’s Note

The UN Global Compact Office and the Global Compact Network Kenya, of which Epsilon Publishers is a member, is hosting a forum side event on Advancing Anti-corruption collective action to achieve the Sustainable Development Agenda scheduled to take place on 29th November, 2016 from 10:30am to 11:30am at Kenyatta International Conference Centre (KICC).

This high level meeting offers business leaders an opportunity to meet with government officials, heads of major international organisations, philanthropies, civil society, trade unions and academia to set priorities for improving development cooperation in the 2030 era.  It will provide a platform to showcase examples of successful business investments in sustainability, examine constraints to scaling up development contributions, and agree on concrete actions to unleash the power of business as a partner in sustainable development.

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