Widespread corporate lapses highlight weaknesses in fraud detection

Spy vs. Spy
June 14, 2018
CoreCivils helps bridge growing road maintenance backlog
October 19, 2018
Show all

Widespread corporate lapses highlight weaknesses in fraud detection

Business fraud is the outcome of a complex mix of conditions and motivations and, therefore, can only be effectively combatted through a strategy that also focuses on preventing this criminal behaviour.

More organisations are adopting such an approach at a time when economic crimes have soared to an all-time high, with just under 80% of local organisations having fallen victim to fraud from various external and internal avenues.

Worryingly, reported economic crime in the country remains significantly higher than the global average rate of 49%.

Of equal concern is that senior management now stands out as one of the biggest threats from within organisations.

Even the most seasoned asset managers were shocked by the extent of fraud committed more recently by representatives of the board of a large Johannesburg Stock Exchange-listed company (JSE).

They were involved in earnings manipulations using off-balance sheet companies to hide losses; uncontrolled acquisition sprees; and tax fraud, while executives collaborated with each other to defraud investors and debt was taken on at a massive pace.

There are many other cases of severe corporate lapses in the private sector, not least of which are the widely reported incidences of managers of large reputable firms who have even conspired with representatives of boards of state-owned entities to defraud tax payers of billions of rand.

This culture has even trickled down to the municipalities, of which 10 reported more than R13,4-billion worth of irregular expenditure this year, while at least one large government department is now bankrupt.

Certainly, the extent of the situation is also mirrored by the number of new fraud listing entries on the South African Fraud Prevention Service’s (SAFPS) database, which increased by more than 50% in 2017, while victim listings grew by a staggering 52% in 2017.

This highlights that far too many businesses still only focus on mitigating the opportunities to commit fraud, whereas as a successful security solution also focuses on the other two drivers of this crime, namely pressure and rationalisation.

Pressure results from internal issues and individuals will rationalise the decision to launch an attack against a business once the opportunity has arisen.

While the pressure factor can be influenced and controlled, rationalisation is a far more complicated element.

Those individuals who have decided to act against their employers have reconciled their planned actions to their own code of ethic and found a way to justify the crime.

A step in the right direction, therefore, is to appoint a specialist to assist in better understanding the environment that governs employee behaviour and, in so doing, identifying strengths and weaknesses.

Havensec Solutions’ investigators have the ability to reveal significantly more information than most security systems, or closed-circuit television cameras.

Our investigation units are trained to find the source of problems in the workplace by recognising nuances, while building trust to develop leads that provide a better understanding of the situation or the locale.

Meanwhile, the company’s covert cameras have also greatly assisted companies by pinpointing those areas that are lax or problematic, while also highlighting inconspicuous staff activities.

They are installed quickly and efficiently and in such a manner that they blend into their environment, and even our own clients have difficulty in identifying their exact location.

According to the SAFPS, the sector most affected by fraud is banking with micro finance, followed by the furniture and clothing retail, asset finance and telecommunications industries.

Another way in which companies operating in these sectors have mitigated their exposure to risk is by conducting thorough pre-employment screening checks on recruits, while more industrious firms have even harnessed Havensec Solutions’ expertise in polygraph testing as part of the process.

Our lie-detection capabilities have also been used to identify guilty parties associated with a crime under investigation, while clearing the innocent and excluding them from an inquiry.

These capabilities have been complemented by the skills and experience of our investigators and researchers who have been instrumental in helping to solve some of the typical cases of fraud, including embezzlement, employee theft, payoffs and kickbacks, skimming and double-check fraud!

Leave a Reply

Your email address will not be published. Required fields are marked *