Seven common questions about corporate fraud

1. What is corporate fraud?

At Blackhawk Intelligence, we define corporate fraud as any fraud undertaken by internal staff or external parties (with or without the help of an internal employee) against a company. It can be a form of financial fraud, like accounting fraud, or it can be theft of products or data. A company, through its directors and employees, can also engage in a fraudulent activity knowingly, like when the company is used as an entity to launder illicit money.

Examples of corporate fraud can include but not limited to:

• Employee theft (money, products, data, intellectual property etc.)
• Accounting fraud
• Tax evasion
• Insider trading
• Bribery or corruption
• Money laundering
• Bankruptcy offences
• Unlawful use of company property to create a liability or cause a loss
• Running ‘Ponzi’ or pyramid investment schemes
• Selling fraudulent goods as the real thing
• Making or using false, forged or falsified documents to fool suppliers, clients, banks or the authority

2. What causes corporate fraud?

1. Personal greed – the perpetrator has a strong desire to enrich themselves but without working for it.
2. Fund an expensive addiction – the perpetrator may require money to fund an expensive addiction or to service debts incurred due to an addiction.
3. Pride – the perpetrator believes that they are better than the others and can get away with anything.
4. Getting revenge on the company – this happens when the perpetrator feels they are undervalued.
5. Opportunity – most companies now store sensitive data online which can be obtained with a few clicks of a mouse. Companies also carry out financial transactions online which fraudsters can pose as the intended recipients. In short, there is plenty of room for the perpetrator to commit fraud.
6. Just for fun – this may seem strange but it does happen. The perpetrator may commit small-scale fraud for fun initially, but after a while they look for bigger thrill and their crime grows accordingly.

It must be noted that the perpetrator is only part of the problem. The company may have poor security procedures, inadequate staff training in spotting fraud, lack of due diligence, all of which can contribute to corporate fraud.

3. How vulnerable is my business to fraud?

All companies are vulnerable, although the type of fraud they experience can be different from one sector to another. For instance, a small e-Commerce site tends to suffer from card payment fraud. A mid-sized professional firm may become a victim of CEO fraud (someone pretends to be the CEO and asks to transfer money) or invoice fraud. A large multinational construction company may participate in bid rigging by working with other suppliers to fix prices.

Numerous research also suggests that SMEs tend to suffer proportionally more than larger companies. It seems that while fraud against SMEs increases, many company owners and directors still work on trust which can easily be abused if there is a low level of checks in place.

4. Our business focus isn’t IT and our technology usage is limited to email and online banking, we should be safe right?

While some fraudsters are at the cutting edge, they are plenty of scammers rely on old-fashioned ways to commit crimes. Creating fake invoices, submission of duplicate expenses, giving free goods to friends, stealing cash – these are just some examples of fraud that don’t require complex technology or complex algorithms.

5. How can I prevent/control the risk of corporate fraud?

First of all, you must assess your risks according to the size, nature and complexity of your business activities. From this assessment, you create policies that aim to foster a culture of accountability in order to reduce fraud risks. The policies may include stringent staff training, encourage whistleblowing, conduct background checks on new hires working in departments that are deemed high-risk, carry out due diligence on new partners, to name but a few.

Get help from a professional fraud management and fraud investigation company like Blackhawk Intelligence can make a difference too.

6. What do I do if I suspect corporate fraud?

Don’t attempt to confront the suspect and give them (or their accomplice) a chance to get rid of incriminating evidence. Call our workplace investigations or accounting fraud teams on +44 (0)20 8108 9317 so we can start to gather evidence for you discreetly. Time is money, our specialist team will work quickly to investigate and preserve the evidence in a format that is admissible to court, should you choose to take legal proceedings later. You can also use what we find to take disciplinary action against the perpetrator or make an insurance claim.

To avoid allegations of unfairness, most companies don’t rely on internal teams to investigate corporate fraud, they choose a professional, trusted and discreet investigation team like us instead.

7. What are the tell-tale signs that corporate fraud may be taking place?

Missing records, excessive variations to budgets, lost assets, absence of audit trails are some obvious indicators.

If fraud is committed by internal staff, then you may notice a change of behaviour in a particular individual – anything from resistance in an audit, being secretive, living beyond one’s means, to blaming others for irregular invoices or missing data.

In accounting fraud, well-liked well-respected individuals in leadership positions are more likely to manipulate company accounts than employees at lower levels.

If an external party tries to scam you, the tell-tale signs include a sudden change of payment method, along with threats and pressure to get you or your staff make a quick decision.