I heard on the news today about a number of T Mobile employees who were selling customers’ details to competitors. Apparently this activity is rife amongst businesses that deal in such sensitive but valuable data as mobile users’ names and contact details – and when dates of their current contract is up! This is theft, but is apparently being dealt with under the Data Protection Act. The Act provides for shows lenient penalties – a maximum fine up to £5,000 from the Magistrates Court and unlimited fines from the higher courts. The Information Commissioner announced that the £5,000 limit is unlikely to be reached, and that harsher penalties should be available to deter this activity.

Why do we not simply prosecute – as I noted above – it is theft after all!

If an employee steals from an organisation he or she is working for there are a number of ways in which this can be dealt with. The decision will no doubt be based on the organisation’s fraud policy and what it wants to achieve. Does it want its money back, to sack the fraudster or to make a public example of the issue? The alternatives include:

• Reporting the employee to the police – the police may or may not be interested. If they are – they may investigate. If they do, this can be disruptive to the business. Often however, given the shortage of police fraud investigation resources the response to a fraud report may well be a request to provide comprehensive details of the occurrence i.e. effectively to go and investigate the fraud yourselves!
• Commencing some form of disciplinary action in order to safely remove the fraudster from the business. This has to be done with care because inappropriate treatment of staff can lead to claims for unfair dismissal or constructive dismissal – even by the guilty fraudster!
• To investigate the fraud using internal or external resources with the view to instigating some form of civil litigation for recovery of the losses due to fraud.

Very often, however, an organisation will do none of the above! They will let the perpetrator go with a reference on the understanding that this is the end of the matter. Incredible though it seems, this is exactly what some major financial institutions or publicly listed companies will do. Not wanting any publicity to impact share prices perhaps, they prefer to hush the matter up!

In the T Mobile case the company chose to inform the Information Commissioner. Let us see if the public interest can steer this affair towards a proper criminal prosecution.

As an investigative forensic accountant specialising in fraud I offer a wide range of different fraud related services to businesses and individuals in diverse locations. It occurs to me that there are two very closely linked subject areas of work within my business of providing asset tracing in cases where some form of asset recovery is being sought and providing fraud prevention advice to companies looking to protect themselves from the risk of fraud.

Why should I consider these to be linked? The reason is that the failure to properly consider a sensible fraud prevention strategy leads to frauds happening with the need for lengthy and complex investigations. It is by failing to heed the dangers of fraud that the fraud takes place!

The revenue that I would receive from providing fraud advice to even a larger organisation on how to establish appropriate fraud policies, defence plans and preventitive controls is modest when compared to a relatively minor fraud. In addition, the fraud would also require the services of legal advisors to deal with it through the courts or perhaps through employment tribunals and the like. It would also take up a lot of the organisations own resources and would likely be highly disruptive. This is even more likely to be the case if the law enforcement authorities become involved in a criminal investigation! 

Please do not think I am complaining as I actively enjoy investigating fraud, but I feel that it is in an organisation’s best interests to spend its money on receiving the greatest value for money. By investing a little on installing a fraud policy and reviewing fraud prevention measures the company is reducing the risk of suffering a major fraud by a huge amount. Any fraud will have a serious financial impact and often can cause a company to fail. Many of my investigations are on behalf of the insolvency practitioner called in to invetsigate the workings of a failed business.

The old adage of “…it will never happen to me…” rings true. We are are guilty of it and unfortunately will continue to be so, not only in our business affairs but also in our day to day life. We do not excercise enough, eat the wrong foods (or too much of it) and drink too much alcohol. Then when we are ill or unhealthy in our old age we say ‘…if only…’

In the same way fraud is a sinister threat to everybody. It destroys businesses and individuals alike. The fraudsters are all around us, driving their expensive cars and enjoying a lavish lifestyle. We don’t seem to notice – but it is time we started treating fraud like the major crime that it is and fraud prevention, not fraud investigation, should be the major service for which I receive enquiries!

My ‘to do’ list for this week includes taking a good look at any missed real business opportunities that I have being a forensic accountant if I do not actively seek out businesses that are unprotected from fraud and try to help them. At present I do give this help, usually after a fraud has taken place and the need for proper contols are at the fron of a victim’s mind!