Managing Fraud Risk: A Practical Guide for Directors and Managers

“But He Seemed Like such A Nice Guy, He Still Lives with His Mother”

I am sitting in the office of the Finance Director of a medium-sized retailer in south London. It is February 1997. I am taking the Finance Director through the results of my review of the circumstances surrounding a fraud that had been carried out by a long-standing and trusted member of his staff. The review has a particular focus on the control weaknesses that had enabled the individual not only to carry out the fraud but also to remain undetected for over three years.

The individual concerned, a man in his forties, had eventually been found out when he became ill and another member of staff had taken over his duties, which included the handling of all the accounting and all the cash arising from a sales unit established on the ground floor in the head office building. Many of the sales were made on a cash basis. Essentially the fraudster had been skimming some of the cash off the sales before any figures were recorded in the books. When the Finance Director had confronted him with the evidence of fraud he had confessed readily enough but otherwise he said very little and gave no indication as to his motive. Subsequently, he was dismissed from his employment with the company and, following the police being informed he had been arrested and charged with fraud. It was estimated that he had stolen over £150,000 from the company in the three years that the fraud scheme had been running.

I am talking to the Finance ...