Fraud becomes more systemised

A recent article in the news showed that the average age of fraudsters is falling – and that they are becoming better educated in software systems and solutions than their employers.

As a result, employers are left unsure that fraud might be being carried out right under their noses. Many solicitors, when defending clients, will be wondering how and why their clients were able to commit these frauds.

With modern technology, it is quite easy to put a trace on an employer’s computer that will enable a fraudster to access all logins and passwords. Unless the employer has loaded key computers with anti-access software, he will be unaware that he could be being hacked by employees – or even be under attack from outsiders who have an ‘innocent’ email which, when opened, accesses data or contains a virus. Modern firewalls, if maintained and updated, usually block all such unwanted emails thus restricting potential fraud to employees.

A popular form of fraud at present requires conspiracy with a supplier who issues inflated invoices which are approved by the relevant employee. Once payment has been made, the supplier then raises an internal credit note and shares the credit with the fraudulent employee. In a recent case, the defendant was found guilty of defrauding in the region of £100,000 of his employer’s money over a number of years.

Another example is where the employee creates his own limited company using a ‘virtual office address’ which sells non-existent goods or services. These are substantiated by purchase orders raised by the employee who then approves the invoice for payment. In larger organisations, the cheque signatory usually relies on the purchase orders and invoice approval as evidence to make payment, thus making it easy for the fraudster.

When material goods are allegedly involved, the fraudster will often ‘mis-post’ a selection of purchase invoices into incorrect categories. This creates errors in the stock balance and an opportunity to slip in invoices for non-existent goods.

Having defended cases like these for over 30 years, I have found that the best form of defence is to highlight the weaknesses in the systems – such as stock write offs due to mis-postings (preferably by others than the defendant) – and also to highlight problems seen continually and not ceased with the prosecution of the employee.

In fact, I have dealt with a number of cases where the problem continued after prosecution. We were able to convince the jury that the client was clearly not guilty of fraud as the problem continued after the client left.