Corporate Fraud is a serious business.  So serious in fact that the Serious Fraud Office gets itself involved at the slightest hint of wrong doing in the corporate arena.  Now for those among you who think that this issue only really relates to publically quoted companies or public bodies, where the fraud is being committed against investors or the taxpayer – think again!  We can assure you that a visit from the SFO could arise just as easily in a private company where employees or owners commit wrongdoing.

The only problem is that the SFO can’t do anything about fraud generally unless they know it is taking place and that’s where we all have a responsibility to keep our eyes and ears open.  When we do suspect someone, we should consider reporting the issue as soon as possible.

So what should we be looking out for in our day to day lives in business?
The SFO has identified certain ‘Red Flags’ as to the behaviours of those up to no good and it’s useful therefore to repeat those in this article, so that we can all see what it is we are looking out for, prior to considering blowing the whistle.

• Significant changes in behaviour that you’ve noticed
• Suspects have large personal debts or financial losses or a desire for personal gain
• Audit findings deemed to be errors or irregularities
• Transactions taking place that were at an odd time, odd frequency, unusual amount or to odd recipients
• Internal controls that are not enforced, or often compromised by higher authorities
• Discrepancies in accounting records and unexplained items on reconciliations
• Missing documents, or only photocopied documents available
• Inconsistent, vague or implausible responses arising from inquiries
• Unusual discrepancies between the client’s records and confirmation replies
• Missing inventory or physical assets
• Excessive voids or credits
• Common names or addresses of payees or customers
• Alterations on documents (e.g. back dating)
• Duplications (e.g. duplicate payments)
• Collusion among employees, where there is little or no supervision
• One employee has control of a process from start to finish with no segregation of duties

As you can see, it’s a quite a list of behaviours – so much so, that it will inevitably raise a few suspicious eyebrows in many an organisation, large and small.  Now don’t think for one minute that just because your boss or an employee exhibits one or more of these behaviours that you should immediately blow the whistle and sit back, whilst they lock up your colleague and throw away the key!  Not everyone who is seen whispering to a colleague in finance is guilty of collusion – so how do you go about distinguishing the protection of your business, whilst ensuring that nobody is wrongly accused?

• First, ensure that your HR policies and procedures are up to date and that managers are carrying out appraisals properly.  This will aid them to monitor behaviour patterns in employees and help you to review the managers’ performance too.
• Talk to your colleagues and employees and get to know them well.  This will flag up early on those who are having a tough time personally and help you to help them before they are tempted.
• View reports, reconciliations and audits critically and never assume that the story you’re being given is correct.  Having a good handle on business finance isn’t everyone’s strong suit, but asking questions and ratifying answers is a far easier skill and may be the key.
• Unless you are in the habit of employing insomniacs or you operate a 24/7 business, banking transactions carried out at midnight are generally suspicious, so encourage your finance staff to be vigilant and question all such acts.
• Have a good system for document control and tracking.  Whilst we’re all striving to be green and use less paper, sometimes written records are inevitable and as long as they’re relevant, they could prove vital in the fight against fraud.
• Generally if something is missing, there’s a reason.  So, a missing asset, a missing receipt or a missing credit is likely to be suspicious.  Unless those responsible have a plausible answer, treat these events as worthy of further digging.
• Always ensure, where possible that for larger transactions (at least) two signatories/log ins are required in order to process them.  This will avoid issues arising with lone wolf operators.
• Finally, protect passwords and change them regularly.  Never share passwords or divulge your password to a colleague, no matter how senior.

If you observe behaviours in colleagues and decide to blow the whistle, do so in as constructive and calm manner as possible.  Gather together the evidence that you have and present it clearly to management or (if you suspect management) using the SFO’s whistle blowing hot line.  Once you have done so, say nothing to anyone about your actions.

The SFO will want to see all your evidence and will want access to your systems and records, somewhere quiet so that they can assess the nature of the problem.  They will need a computer terminal and a dedicated company resource who should be a responsible and trusted person, with whom they can liaise.  At no stage should any doubt or suspicion be placed on the individuals concerned.
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f you suspect corporate fraud, think first before you act.  If you feel the need to discuss matters beforehand with an adviser, we would be happy to assist you.  Please call us on 0844 209 8500 or email in confidence at enquiries@future-law.co.uk.