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Preventing insider fraud

The Association of Chief Police Officers recently estimated that fraud costs the UK economy around £20 billion a year and that most fraudulent acts are committed by employees. Whether it's criminal gangs infiltrating firms to commit insider fraud or the tendency for more people to commit criminal acts because of personal and financial stress, it is no surprise that the number of internal fraud cases reaching the courts is high.

1. Confirm a candidate's identity

Proper identity authentication is key to the screening process. Checking that a candidate is who they say they are should always be the starting point, as background checks are often rendered ineffective if a candidate's basic details are incorrect. A candidate may attempt to avoid criminal records or reference checks by omitting addresses or providing false information. If they are new to the country, a thorough background check needs to examine their record in previous countries of residence.

2. Get candidate's permission

Proper background checks are designed to protect employees as much as the business, so it's essential to gain their permission. Experian's own experience has also shown that there is a 15 per cent drop-out rate when applicants are told that background checking is carried out, highlighting the strength of robust procedures in deterring potential fraudsters.

3. Carry out thorough checks

Financial checks can highlight any red flags, such as bankruptcies or other financial stress. These can provide warning signs into a candidate's suitability, although be mindful of jumping too readily to conclusions. While extreme financial pressure can make some more vulnerable to coercion, this must be seen on a case-by-case basis.

4. Don't only check senior positions

It is a common misconception that the more senior a position, the more checks are required. But it can often be some of the most junior employees who are the biggest threats in terms of fraud, as they have less loyalty to the firm and less to lose, with access to sensitive customer information.

5. Dealing with a negative background check

The response depends on the severity of the offence. In some cases, a criminal conviction may be highlighted for a relatively minor offence, such as a speeding penalty. In this situation, the employer can make a judgment call. More serious convictions, however, may bring the integrity of the candidate into question or have an impact on the role they have applied for. In these cases, appropriate steps should be taken to mitigate any risks they may pose to other staff or to the organisation's reputation.

6. Ongoing screening

Lastly, while pre-employment screening will significantly reduce the threat of a poor hiring decision, an ongoing vetting strategy can play a vital role in combating insider fraud. Ongoing screening enables companies to identify changes in an employee's circumstances, allowing them to make a better assessment of the risk they may pose. Just as background screening at the application stage can deter rogue candidates, an ongoing vetting process can highlight existing staff who may be most vulnerable to committing fraudulent acts.

Key points

- Verifying a candidate's identity should be the starting point.
- Using a third party can ensure compliance conditions are met.
- Background checking should be applied at all levels, not only senior positions.
- An ongoing staff screening strategy will help prevent fraud.