Dear Companies, Here are Critical Signs to tell if your Employee is indulging in Fraud

Fraud is a pertinent problem for small and big companies alike. A recent EY report titled ‘Individual accountability in the spotlight as India Inc. battles fraud, bribery and corruption’ states 58% of Indian respondents of its survey believe that bribery and corruption happens widely in the country, and one-thirds confessed they do not flag fraud or corruption related incidents. This highlights the magnitude and severity of current environment and scope to address existing challenges. Notably, the survey comprised in-depth interviews conducted with prominent senior executives in India across functions such as finance, internal audit and risk, legal, compliance and others.

We chatted with Mukul Shrivastava, Partner, Fraud Investigation & Dispute Services at EY, who has been working with corporate to identify fraudulent practices in organizations.

“All kinds of fraud are happening in India today in various sectors from media and entertainment, retail, e-commerce, financial services to real esate. Even as fraud levels are going up, the change we have seen is corporate and other organizations are now aware and wanting to take proactive steps. We are helping them corrective steps in line with the kind of fraud that I staking place, it could be filing an FIR to registering a court case,” Shrivastava said.

He also shared with us some of the signs they pick up that could tell an employee in the company is resorting to fraudulent practices.
EY’s Fraud Investigation & Dispute Services team banks heavily on lifestyle check. “It is one of the most crucial aspects of our investigation,” Shrivastava said.

It’s simple, he says – “If somebody earning 5-10 lakh annually wears a Rolex watch to office, it is a clear indication something is wrong.”

“The moment a person starts driving a Mercedes when all of his peers are probably struggling to buy a high end Indian car, that’s a big red flag. It’s quite possible he/she hails from a rich family background, but more often we see the moment we do a lifestyle check which could as simple as finding frequent Euro and US travel pictures on Facebook, the car he drives, the watch he/she wears, the kind of house he stays in, the right fish is caught in our net,” Shrivastava said.

So, a sudden shift to wearing new high-end fashion brand clothes and accessories, taking frequent foreign trips, savouring expensive meals in top end restaurants are signs that indicate additional source of income of an employee, and if it’s too expensive for them to afford such a lifestyle, they become suspects and rightly so.

Even as lifestyle check forms a big part of EY fraud investigation team’s probe, there are some other indicators to nab culprits.
“Organizations with lot of missing documents, a lot of disputes with vendors because payments may not have been made or fake bills could have been passed, could indicate individuals from the company are siphoning of money,” pointed out Shrivastava.

He added – “Also, signs can be found in an employee’s behaviour. Someone could be under financial pressure, addicted to gambling, sitting in office till late hours, not going on leaves, refusing to move from one department to another in the company, or working in the same company for a long time. All these are worrisome signs for the company. For instance, a manager not sharing what he is doing, and not segregating duties to team members is a cause of concern. He may be wary of sharing because of his fraudulent means. Also, employees reluctant to move across departments within their company, or those who have been in a particular organization for a long time, is also a signal for the firm that they may be minting money in that particular role, and any movement could take that away from them.”

Frauds also take place at the management level, and these need no signs because the tone at the top is very difficult to hide from employees.
“Most employees are aware when the top brass is resorting to unethical ways of minting money for their businesses. They are just scared of reporting the matter due to laxity or in fear of losing their jobs,” Shrivastava said.

It’s easy for his team to decipher the frauds at management level. “The ethics and policies they follow speak volumes about the management. For instance, the intention can be gauged by seeing how professional they are, do they have a proper Code of Conduct, do they have a whistle blowing policy or not etc,” he said.

Owing to the rapid rise in cases related to fraud, bribery and corruption in recent times, there’s greater need to have specialists to secure and shield businesses. Shrivastava said, “Companies are now becoming aware of the need for fraud investigators, and India has them. It’s just that they need to be recognized for the sheer talent they come that can help our companies secure their money from corrupt people.”

It is in this regard, the EY Fraud Investigation & Dispute Services and Association of Certified Fraud Examiners (ACFE) Western Region Chapter has launched the flagship ‘Forensic Trailblazer Award’ to honour the best forensic talent in India and enhance awareness about this field.

“The impact of fraud and corruption has affected corporate India, and is no longer overlooked as an ‘inevitable business evil’. With forensic professionals being key enablers to transform the risk environment and drive ethical change, it is important to commend their capabilities through a platform that will gain universal recognition.” said Uday Shankar Dutt, former Director General Police and former Joint Director, Central Bureau of Investigation.
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