According to the Federation of Small Businesses (FSB) some 20% of all crime takes place on business premises. When you think of all the theft, murder, drugs and the like, this is an awful lot of crime!

The reason of course is that businesses are the target for all forms of fraud – employee fraud, creditor fraud, supplier fraud, Internet fraud…the list can go on. You should not wait until your business becomes a victim as it inevitably will at some point, do something about it now.

Apart from the obvious security issues for your assets, you need to put together a fraud reduction strategy that will help protect your business from various types of fraud, phishing, pharming, identity theft plus hacking and virus threats to your IT systems.

Your data needs protecting also. Even apparently simple information such as your customer lists are valuable and you do not want your employees giving it to your competitors. The data can also be lost through burglary and criminal damage to your premises. Think of the effort that would be required trying to recreate this information.

Remember to vet your employees when recruiting. You want trustworthy workers who will not put your business and assets at risk. Resumes very often contain falsehoods, and at best exaggerations. Make sure you take up references, check periods of employment and question what an applicant was doing in a “gap” period. Perhaps they were doing time at Her Majesty’s pleasure for fraud! Yes fraudulent employees do commit the same crimes time and time again, moving from one complacent employer to another.

Complacency is the name of the game when it comes to fraud risk. Although it does not always pay to be overly oppressive in your anti-fraud policy and cause resentment and even fear amongst your staff, a tightly controlled work place will undoubtedly prevent the fraudster striking or at least make him think twice before having a go.

Mark Jenner is a forensic accountant and fraud expert advising companies on cost effective ways of preventing fraud.

There is a definite rise in the incidence of employment fraud during a recession, though this will often only come to light in the months and even years following an economic downturn. Some employment fraud however will be discovered during the downturn, as hard pressed companies take a closer look at their finances and discover losses might have been taking place.

Recessionary pressure affects employers as well as employees. Cutbacks have to be made and it is often the case that a company is in constant review of its finances, looking for ways to survive let alone grow and make profits. There will be constant talk of “tightening of belts” and likely rumours of redundancies – even if these do not actually take place. This has a knock on effect on the employees, many of whom will start to feel insecure in their jobs.

This leads to one of the drivers of employment fraud due to economic downturn. There is a decreased loyalty shown to the employer because of the real or imagined layoffs. This can result in some seeing the opportunity for compensation in the form of helping themselves fraudulently! This tendancy is even more marked if there have been reductions in pay levels or even cuts in overtime opportunity.

The second cause of employee fraud during an economic downturn is the financial hardship experienced by the employees families generally. Even if the employee is secure in his own position, a family member might have lost their own job and household income is reduced. It might even be perceived pressure from the need to save more in case of much greater hardship in the future.

The third clear driver in the increase in employee fraud during a recession comes from the cost cutting excercises that an employer might be taking. Very often non essential positions are cut. These tend to be the middle management levels, not the productive workers and not those in ultimate charge. The trouble is that this is the layer of management that effectively controls fraud within a business. It is the layer of supervision, the division of duties and monitoring that creates a secure financial system. Remove some or all of this and large windows of opportunity for the fraudster can appear. It often happens that internal audit and dedicated fraud prevention functions are seen as non essential and down sized accordingly.

With an increase in employee fraud and a reduced capability to deal with it, when a fraud does occur a company might find itself in the position of having to call in specialist fraud investigators. The cost of employing a fraud investigator in a recession is an added burden in trying to out ride the downturn.

One of the areas where I have been involved over recent years is investigating fraud arising out of insolvent estates and organisations.  This is where a bankrupt person or director of an insolvent company has, in preparationn for, or in contemplation of the impending crash hidden or removed assets.  This is theft of course from the creditors of any bankrupt estate and there are provisions within the Insolvency Act 1986 for returning these assets.

This means that whenever I have investigated such a fraud it has been on behalf of an Insolvency Practitioner who has a licence to hold office as for example a trustee in bankruptcy, a receiver or a liquidator.  Acting as a fraud investigator or asset tracer means that I can excercise powers that he is granted under the Act and allow me to recover documents and question directors, employees and suppliers etc in order to determine where the assets have gone and how much could potentially be recovered.

An example of the powers granted by the Act is whereby under S236 the Insolvency Practitioner (or somebody acting on his behalf… i.e. me) has the right to demand information from say a director about a particular payment he authorised just before his company went under.  It may be that the payment was not at arms length to a bone fide supplier, but a preferential payment to a friend.  Under these circumstances this payment can be recovered for the benefit if the disadvantaged creditors of the insolvent company.

Recovering the preferential payment may need a court order, in which case it may be necessary to question the director before a judge (in the High Court) in order to get an order made for repayment.  A tennacious Insolvency Practitioner or his representitive may undertake this questioning in court as this would be cheaper and more efficient that employing a barister!  I have undertaken this task on a couple of occasions and I can assure you that asking the questions before the judge is a whole lot better that being on the receiving end which I usually am as an expert accounting witness specialising in fraud matters!

These investigations have been a little quiet over the past 24 months but I can see the opportunities as a fraud investigator approaching as a result of the current economic downturn.  There are a lot more frauds to surface as a result of the way companies have been run over the past year or two in an attempt avoid collapse as the credit crunch bites.

It is hard to believe that I have a physics degree and that I learned all about how computers worked, how to install binary operating language, how to write  a couple of different programming codes and even how the solid state electronics found in micropchips were configured.  Why, because when computers started to become available as desktops I was the biggest cyber luddite to be found.  I was dragged screaming and kicking into the computer age and eventually succumbed to an Amstrad with no hard drive in about 1990.  Well my phisics degree was awarded over 30 years ago!

So now as a fraud investigator I realise that it is important to be familiar with all aspects of cybercrime.  All businesses use computers and it is hard to spend money now without some form of electronic device involved.

Two thirds of UK households use the Internet with online purchasing a massive growth area.  It is not surprising that the threat of cybercrime is on the increase and we fraud investigators need to be ready with the appropriate tools and knowledge to deal with it.

Much of the crime being carried out is the same old frauds simply using the electronic medium of email for communication.  For example the Nigerian 419 scams that solicit bank details or up front payments in advance fee frauds used to be posted out to contact details from telephone directories.  This was a costly (the price of stamps) and time consuming excercise.  Now with a press of the return key any number of 419 letters can be sent to unsuspecting recipients on an email database.

Other frauds being committed via the Internet include identity “phishing”, spyware to extract bank and credit card details and fraudulent selling sites.  Many valueless schemes for getting rich quick are available for the gullable and often greedy customer waste their hard earned savings on.  These selling schemes exploit the vast nature of the Internet – by optimising your web site for a keyword such as “easy money” you will receive 1000s of interested browsers every day.  It is a numbers game.  For every 1000 web site visitors you might get one person to part with their £50 or $100 for a “guaranteed business plan that works”.

Business opportunities that succeed require hard work.  Those that do and those that are merely scams are reviewed in Business Opportunity Market – before paying for that Import Export course it might be worth a quick bit of research!