Here is how to implement “Know Your Staff” policy effectively

Did you know that internal staff are responsible for most frauds in your company? Recent research by the Association of Certified Fraud Examiners (www.acfe.com) reveal that over 80% of the frauds are committed by first time offenders, of which insider involvement is 90%! Your fraud management strategy should focus on minimizing staff fraud.

This means one off background checks on staff at recruitment does not add value, yet many companies spend a lot of money in the activity.

Here is the deal:

Undertake on-going background checks on your key staff.  I mean, if someone is in charge of your mission critical infrastructure or operations e.g. head of procurement, IT or mobile money system manager, why not keep an eye on their wealth accumulation? As they join the company, ask them to declare their total wealth, including that of close relatives (that you must know). Then, on a six-month basis, let them keep updating their wealth accumulation.

This information will be handy, in case of suspected fraud. Any wealth they cannot explain, must have come from their working in your company.

For the above to be effective, ensure that your anti-fraud policies and procedures are specific to the fact. Any undisclosed wealth accumulated by staff during their period of employment with you will be confiscated unless they prove how they got it.

As a professional anti-fraud examiner, I have found that very few, if any, are above committing fraud. All of us have a need to live good lives, drive a nice car and of course travel. We all have motives and need more money to finance our livelihoods.  You and me have reasons for our actions. That is we tend to justify and rationalize every time we do something. “I’ve been here for long, I deserve a better pay”, “this company makes over Ugx. 2bn revenue daily, my stealing Ugx. 40m is just peanuts.”  A fraudster will justify to themselves for stealing.

And of course, fraud will be committed as long as there is an opportunity to steal.

The lack of strong controls gives raise to opportunity to commit fraud. Your best bet is to ensure your controls work as intended. You need to also focus on training your staff in personal finance management (to reduce their motive to live beyond their incomes) and in ethics and integrity (to reduce their rationalization or justification for fraud).

That is why you need a professional to craft training strategies that address a specific need, instead of just doing ‘ethics training.’

To be continued.

Copyright Mustapha B Mugisa, CFE. 2013 All rights reserved.

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