Internal fraud is increasing at an alarming rate and, says Howard Young, if we are not vigilant, it may well be our downfallinternal fraud against companies and insurance companies is on the increase, and in recent years it has become far more conspicuous. This may be attributed by some to more rigorous and effective countermeasures. However, it is more likely to be due simply to an increased prevalence of the crimes. Companies now have to be more vigilant than ever to combat an ever widening variety of fraud.
One emerging frontrunner is computer fraud. As people reap the rewards of the technology revolution, fraudsters are becoming more adept at computer software hacking. The skills they acquire are then used against the company using the company's own financial systems.
Procurement fraud is another growth area, particularly within larger companies. Fraudsters will set up false suppliers and give a kickback to the company buyer for the contract. This type of fraud is also made easier by the lack of human intervention in many processes which have become governed by IT systems.
With the increased reliance on technology for communication it is not only easier to perpetrate these frauds but also for those frauds to be perpetrated over long periods of time. This allows the fraudster to dissipate the assets internationally without ever being discovered.
The Allied Irish Bank was a good example of this. Although the fraud was eventually uncovered, the assets stolen remain unrecovered to date.
And it's not just multinationals or financial companies which are at risk. Closer to home, the public sector and local authorities have been hit hard with a massive increase in fraud in both sectors.
The NHS has become so concerned that it has actually set up the Directorate of Counter Fraud Services.
From a local authority point of view the main problem is in the `slip, trip and fall' arena. Where, historically, someone may simply have tripped, they will now increasingly sue the local authority for negligence - and may even exaggerate their injuries to increase their claim.
In the NHS, however, the fraud may be far more calculated. External contractors such as opticians or pharmacists are charging for services they have not provided or even for prescribing drugs for people who do not exist.
But it is not just the NHS that is suffering. Fraud against private and permanent health insurance companies is becoming much more common. In a recent case, a doctor had been signed off on permanent sick leave on a recommendation from a psychiatric report. He was therefore receiving a full pension, but under investigation it was discovered he was effectively working full-time writing medical reports.
He eventually agreed to pay back all money he had received from the insurance company, but there are plenty more out there who continue to slip through the net.
Howard Young is a partner and fraud expert at law firm Hill Dickinson
