New Zealand has experienced a very large increase in the value of fraudulent activity in recent years.  Fraud is a constant and serious threat to all sectors of the New Zealand economy, and unfortunately the Māori business and governance sectors are not exempt.  Fraud in these sectors is costing many organisations

money and damaged mana.

What risks does your organisation face from fraud?

Are your systems up to standard?  How can you try to avoid hiring fraudsters? How can you try to prevent fraud through good systems? What can you do if you suspect fraud?

Questions to ask yourself.  Does your organisation:

  • Require face to face interviews with all shortlisted potential employees?
  • Do reference checks by phone to referees?
  • Do Police checks on potential employees before you make an offer?
  • Have a policy/procedure manual for all staff?
  • Require two or more signatories for all payments?
  • Have policies for checking accounts receivable and payable?
  • Have cash-handling policies in place?
  • Require staff to take annual leave?
  • Have a policy on reporting fraud to the Police?

If you are hiring, especially for a position where that employee is going to have access to your accounts, you need to follow good pre-employment guidelines:

  • Get a written CV.  Check it for gaps and inconsistencies.
  • Get an application form completed in advance of the interview and do background checks on the information provided.
  • Interview in person and use at least two people.  One to make good notes and the other to watch for body language and reactions.
  • Have a list of questions, so you cover all points and ask consistent questions of the applicants.
  • Drill down on answers to see if they really are telling the truth e.g. ask how they would handle a certain situation.  Then ask for more detail.
  • Talk to all referees.  Have a list of questions.  Ask if they would re-employ the applicant.  Be wary of even the slightest hesitation.  Be suspicious of applicants who do not want you to talk to their current employer. Have they been pushed out?
  • Consider getting a Police vet done.  Get written permission (you will need ID such as their driver’s licence number).
  • Have written employment agreements… and you must keep a signed copy, plus a copy of any draft given to the employee to consider.

During Employment

Ensure you have policies in place to deter fraud – take away the opportunities, even if people have the inclination.

Be aware that fraudsters are often highly trusted, long-term employees, who no one would suspect, so make sure policies are followed by everyone, all the time.  The policies are there for a reason, so do not let them be ignored.

Make sure your employees take annual leave.  Fraudsters often do not take leave.  While they are away discrepancies may be found.

Cash handling, creditor payments etc. should be prepared and approved by at least two people.  Both people should sight the source material.  Check bank account numbers as invoices can be doctored to insert a different bank number.  Extra invoices can be created so the creditor gets paid, but so does the fraudster.

Do random checks.  Call the creditor to check on the invoice.  Is it real?

Suspected Fraud

If you are suspicious, then do background checks to see what you can discover.  Act quickly but stealthily, so evidence does not disappear.

If you think fraud has occurred, you must follow a full and fair investigation process.

You do not want to be paying the fraudster damages for their hurt feelings because of a poor process.  Free guide on Investigating fraud