Occupational or Employee Fraud poses a significant threat to organizations, as fraud trends indicate a rise in the occurrence of this category of fraud. Occupational fraud can result in organisations being exposed to significant financial and/or reputational risks. The recent economic crisis has resulted in even further increased fraud risks, which threaten businesses across the globe.

The ACFE’s (Association of Certified Fraud Examiners) 2008 Report to the Nation on Occupational Fraud and Abuse estimates that:-

• U.S organisations lose 7% of their annual revenues as a result of occupational fraud.
• Asset misappropriation and corruption were the most commonly reported categories of occupational fraud.

According to a study released by the ACFE during 2009 on the impact of the economic recession on the occurrence of fraud, of the 507 CFE’s (Certified Fraud Examiners) surveyed:-

• 55% of the respondents surveyed observed an increase in the number of frauds perpetrated since the start of the economic recession, 49% of the respondents surveyed observed an increase in the Rand value losses arising from frauds perpetrated since the start of the economic recession.

As employees are faced with growing personal financial pressures, they are increasingly likely to succumb to the temptation of accepting incentives or bribes offered by criminals to assist them in committing frauds against their employers, or seek opportunities to defraud their employers on their own.

It is therefore essential that organisations adopt a recruitment strategy that is aimed at attracting not only adequately skilled and capable personnel, but also individuals who conduct themselves in a highly ethical manner. Comprehensive background checks are an important fraud prevention method, which should be performed as part of the recruitment process for all job applicants.

By Jane de Klerk (B Compt. (Hons); B Proc)