Internal fraud: trust has its limits!

Most fraud is committed by its own employees. Many entrepreneurs refuse to believe that. "I know my employees, I hired them all myself. They are not criminals!", is a common sound. According to our annual Benelux fraud survey, 59% of companies experienced fraud (attempts) by their own employees last year. Who are these internal fraudsters? How do you recognise them?

Employees who rip off their employer are encountered at all levels of the company. It could be anyone. However, male offenders are still more common (64% vs 20%). What is striking is that they are often men who have been employed for less than five years. These repeat offenders tend to be men aged between 35 and 45. But beware: the biggest fraud offences are often caused by precisely male offenders between 40 and mid-50s. They are well-educated, hold senior management positions and often have been working for the company for at least 10 years.

Multiple offenders are younger, often less educated and lower in the company's hierarchy. They commit the most crimes in number, but usually smaller amounts are involved and the fraud is often detected early.

The older, more educated fraudster, often with managerial duties, knows the company systems and mechanisms inside out. Because they are often long-serving, they enjoy great trust among colleagues and superiors. This provides them with all kinds of freedoms, including access to confidential systems and information. All in all, an ideal environment to cheat their employer over a long period of time without arousing suspicion. Meanwhile, they are friendly and polite to everyone. When it turns out that they have committed fraud it usually hits like a bomb. They are the last people you would expect it from.

In his research on offender types, Noll found that greed is a common motive, alongside chronic lack of money. "Fear of social exclusion can also be a motive for crimes. Consider, for example, fraudsters who want to make up for a lack of recognition by parents or spouses through their standard of living. Another common motive is revenge, for example if an employee feels he or she has missed out on a promotion."

Many fraud cases go unreported. Companies handle it themselves and want to avoid negative attention. Our annual fraud survey shows that one in four companies handles fraud internally. We also see that companies are increasingly taking measures to prevent fraud.

Most mentioned measures are increasing fraud awareness among employees, additional controls from the administrative organisation and employee screening. Two factor authentication and the four-eye principle are also increasingly applied. A majority of companies see fraud as an increasing risk. 64% say they perform fraud risk analyses and almost 30% say they will invest more to reduce fraud risk. In particular, these companies are putting more money into security audits of their IT systems and into training to raise fraud awareness among employees. More and more companies also have a contingency plan (a roadmap should fraud come to light).

For employers, it is important that employees dare to report a colleague's suspicious behaviour. This requires an open corporate culture: make internal fraud negotiable during meetings and raise it as a topic during performance appraisals. Involve employees in operational management. That way, they will feel more responsible for what happens internally and call each other to account for deviant behaviour.

Furthermore, controls within a company should be effective, but not so strict as to create a culture of mistrust, Noll warns. "If employees do not feel trusted, the company suffers in other ways and that is equally undesirable."