The phenomenon of internal fraud, where staff or contractors exploit their positions within organizations for illicit gain, is an escalating concern across various sectors. Recognizing the critical role of chartered accountants in fraud prevention, the Institute of Chartered Accountants in England and Wales (ICAEW) has developed a series of educational videos focusing on real-life incidents of business fraud.
One such case featured in these videos involves a financial controller who made an attempt to misappropriate £20,000 from her employer. This case serves as a catalyst for discussing strategies to deter and detect internal fraud within organizations.
Internal fraud, or employee fraud, encompasses a variety of deceptive activities committed against a business by its employees. These activities can range from scams involving invoices, payments, and procurement to fraud related to expenses and subsistence. All organizations, regardless of their size, industry, or geographic location, are susceptible to internal fraud, and the motivations behind such actions are varied. However, there are proactive measures that organizations can adopt to reduce the likelihood of fraud and to identify any fraudulent activities early on. For example, conducting regular and detailed variance analysis can help uncover unusual transactions, which may be indicative of fraudulent conduct.
Omid Tissier, Economic Crime and Ethics Manager at ICAEW, emphasizes the unique risk posed by internal fraud due to employees’ access to sensitive information and resources. He notes, “Internal fraud can be particularly damaging due to the trusted position of employees within an organization. It is essential to establish strong controls and procedures to mitigate this risk, as well as to foster an environment where employees feel comfortable reporting any suspicious activities they observe.”
This focus on internal fraud is part of ICAEW’s broader initiative to educate and equip organizations with the knowledge and tools necessary to safeguard their operations from such unethical practices.
