Fraud and financial crime not a new phenomenon

Fraud and financial crime is not a new phenomenon when it comes to businesses. Over the years, financial fraud has been the very basis for the downfall of many major businesses. Addressing the lacks in the businesses which may allow such fraudulent practices has always topped the agenda for all the businesses regardless of their size or nature.

Today, I will bring to your attention one such occurrence which deprived the business of its resources which otherwise could have been used to boost their bottom line.

The incident relates to one of the luxury island resorts, which was bought and developed by Mr Green.

He still remains as the owner/ manager of his resort but unfortunately, he has deteriorating health conditions.

The resort has been prospering and has grown enormously over the years.

Mr Green realised that he needed an accountant to provide better informed financial services.

He had a personal banker in one of the eminent banks so Mr Green asked the banker for her personal recommendation for the accountant’s position.

The banker recommended her brother for the accountant’s position.

Mr Green trusted the banker with her recommendation and hired her brother, Mr Grey, for the position. Mr Grey performed his duties well and built a good rapport with his fellow employees and with Mr Green.

He was entrusted with many administrative and accounting duties and was also responsible for preparing cheques and processing payments.

Mr Green later discovered that Mr Grey had not been really honest with his job.

The audit findings revealed that from a very early stage of his employment, Mr Grey had been forging documents and cheques. He forged a total of 84 cheques amounting to almost $850,000. Mr Grey wrote his own name as the payee on half of those cheques, and on others he wrote his family or friends name as the payee. Mr Green hardly scrutinised the cheques for amounts less than $10,000 as he trusted his staff with their work.

In this way, Mr Grey wrote cheques of slightly less than $10,000, forged Mr Green’s signature on the cheques, and banked them in two different accounts under his name and into the accounts of his friends.

In some instances, Mr Grey would change the name of the payee on the cheque for amounts over $10,000 or would alter the figures on the cheque then forge the initials of Mr Green near the alterations. Throughout this time, Mr Grey’s sister, the banker, had all the capability of facilitating the processing of these cheques.

The fraud occurred over a period of 21 months and the forgeries became more brazen as the fraud progressed.

The evidence showed the proceeds were used on land and luxury vehicles.

Mr Grey held the key role of forging the cheques and documents and took advantage of his position and the trust bestowed on him.

The teachings of the story being:

■A●ways ensure to run a thorough background check when hiring personnel for key roles, especially for duties which would involve handling funds, key information or assets of the business.

■Have well established internal control measures to discourage staff from colluding or causing a disadvantage to the business.

■A●ways ensure that the valuables of the business such as cash or assets, which can be easily misappropriated, are well secured and are always accounted for. Have the cheque books stored in a secured place and do not pre-endorse them.

■Do not entrust responsibilities to any one person for a prolonged time. You may choose to engage person for a particular duty on a rotational basis, especially if it involves handling or accounting for cash.

■Scruti■ise the documents and the cheques thoroughly before endorsing.

■Have a personal attempt to reconcile the bank statement details to the payments endorsed.

This is particularly essential for smaller businesses with limited resources.

In smaller businesses, any one person may be entrusted with many overlapping responsibilities which may enable them to venture into such mal-practices.

It is thus sensible to check all the records prior to approving any release of funds.

Not only is it the responsibility of the businesses to ensure that such shortcomings are pre-addressed, the obligation shall also lay with the individuals to always act with integrity.

With the growing need to rely on others for required services, it gets equally difficult to fully entrust a third party with your valuables. However, seeking to ensure that your valuables are well accounted for and are safe shall be everyone’s prerogative.