Christmas crime season
It may be the season to be merry but for many it is also the season to turn to crime. “Increased year-end spending can put employees under immense financial pressure,” says David Loxton, a director at Werksmans Attorneys. “Financial pressure is the most important component in the anatomy of an act of fraud.”
Warning signs, he says, include an employee buying extravagant presents or booking overseas trips well above their salary bracket. Another classic sign is an employee’s reluctance to take leave during the festive season. “This can indicate an employee does not want to relinquish relationships with suppliers, often because the relationship is fraudulent,” says Loxton. The incidence of suppliers giving kickbacks to clients’ employees to “buy business” is on the rise, he adds.
Andre Vos, a director of law firm Norton Rose, provides more insight. “Employees exploit weaknesses in control systems,” says Vos. One ploy, he says, is for employees to “pay themselves” using legitimate invoices from suppliers that have already been paid, under the pretence that the invoice has been overlooked. The employee merely substitutes the supplier’s bank account details for his or her own.
Fraud is not confined to lower-level employees. Senior executives in the accounting field are often tempted to “fiddle the books”, especially at bonus time, says Loxton.
Vos says SA has strong legislation in place to combat white collar crime but is falling short on enforcement and prosecution. Loxton agrees. “SA companies are becoming disillusioned because they see so few successful prosecutions,” he says. “We urge companies to aggressively pursue prosecution of employees who have committed fraud, but many now go no further than laying a charge with the police, knowing it will go no further.”
Foreign multinational companies in SA have a better record. “They are obliged to pursue offenders,” says Loxton.
Vos and Loxton say fraud prevention must start at the top. “Executives who spend lavishly are likely to encourage a similar culture among employees,” says Loxton. Employees, he says, think: “If they can get away with it, why can’t I?”