Internal Fraud

Internal fraud – ie fraud committed by the employees of an organisation - is nothing new and is a well-established enemy of business and development. This Fraud for Thought article considers what influences internal fraud, before discussing the impact it has.

Organisations rely on their employees and invest considerable trust in them to fulfil their roles competently and diligently. Cressey’s fraud triangle attempts to explain the reasoning behind a person’s decision to commit fraud. The three elements, categorised by the effect on the individual, can be summarised as pressure, opportunity and rationalisation.

Opportunity: Weak policies? Lack of checks on invoices? No checks made on spend?

Rationalisation: I haven’t had a lunch break all week so I deserve this! Everyone else does it so why not? They didn’t pay me my overtime! I see the boss knocking off early all the time!

Pressure: Need; gambling addiction, spiralling debts, financial worries, pressured by a third party. Greed; money, unaffordable lifestyle choices

Reducing opportunity is something we can all help with. Additional layers of checks such as sampling expense claims or adding a declaration to claim forms, are all simple and relatively straightforward methods to ensure that the risk the fraudster takes when committing fraud, is a significant one as they are more likely to get caught.  A significant deterrent effect is also created when staff know that their activity and claims may be subject to checks.  Managers don’t have to check everything; sample checks are fine!

Rationalisation is more complex as it can be influenced amongst many things, by the organisations ethics and structure. If management and the executive lead by example this will help with creating a positive anti-fraud culture where staff do not feel unfairly treated. This will reduce the opportunity for staff to rationalise their behaviour.

Pressure can be in the form of pressure from an addiction, or debt or pressure to live a lifestyle beyond your means or may be nothing more than pure greed. However high the pressure, the organisation can ensure that potential fraudsters do not have the opportunity to commit fraud by ensuring the robust policies and procedures are complied with throughout.

We can see the impact fraud and bribery has on private sector businesses; loss, layoffs, settlements, sale and potentially, the business may fail. However, what about the NHS which is just as vulnerable to fraud but not able to ‘fail’? Can we be sure in the same way that the private sector is, about what the ripples of devastation are? The impact of fraud losses aren’t quantified in such detail.

The NHS Counter Fraud Authority estimates the annual loss to fraud as £1.2 billion in 2019. Unfortunately, we know that staff are responsible for a significant proportion of these losses.  Undoubtedly the losses to fraud are a contributing factor to why the word that often accompanies the NHS is “crisis”. The NHS simply cannot afford to lose £1.2 billion and be expected to keep on going – but it does. There are fewer resources and more people requiring treatment; resulting in staff working longer hours, increased pressure and reduced trust. All of which can present a risk within the fraud triangle.

It is therefore crucial that NHS staff work with their Local Counter Fraud Specialist to identify and reduce fraudulent activity that takes money away from patient care. We place considerable importance on meeting members of staff and joining in on team meetings to raise awareness of fraud; what it is and what it might look like.

Together we can make a huge difference!

Fraud prevention tips:

• Remind employees of their value!
• Ensure that whistleblowing policies are well publicised with the reporting details included
• Raise awareness with staff about what fraud looks like; working for another employer whilst off sick and falsifying timesheets or false expense claims are a few examples. Contact your LCFS to arrange a presentation or workshop.
• Report concerns to the LCFS – staff can discuss their concerns with impunity.

1 Donald R. Cressey, Other People's Money (Montclair: Patterson Smith, 1973)

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