Lenders urged to be alert as insider scams spiral

Fraud committed by firms’ own employees has risen to 60% in the US, and industry experts are warning the situation is just as bad in the UK.

The US findings were put together by the Association of Certified Fraud Examiners.

Here, Angus Stewart, chief executive of fraud management specialist e-Solutions, says that fraud committed by UK bank and building society employees is now one of the biggest security threats they face.

He says that in 2009 insider fraud accounted for more than £500m worth of criminal activity and predicts that figure will increase this year, with a significant rise in the number of fraudulent incidents being reported in the UK’s financial services sector.

Stewart says: “In troubled economic times the number of individuals committing fraud naturally grows. The sooner vulnerable organisations accept this, the better it will be for all concerned.”

He says the number of investigations into the conduct of solicitors, brokers and surveyors increased by some 450% last year, and is urging banks and societies to do more to enhance their internal systems to help them detect mortgage fraud in an effective manner.

Stewart recommends that firms employ technology-based monitoring tools to flag unusual activities at an early stage, conduct comprehensive checks of job applicants’ CVs and focus on installing a series of tools and processes that ensure members of staff adhere to the rules and management teams are alerted to any breaches.

He adds: “Tackling fraud – particularly crimes that are committed by individuals on the inside – is not as difficult as it might seem at first glance. Like a lot of business activities, the key is to take it in two phases – planning and execution.”

In the past year more than 700 allegations of fraud have been made against brokers to the Financial Services Authority’s Information from Lenders volun- tary whistle-blowing scheme. As a result, 80 banning orders have been introduced.

Fraud has also been evident in the legal world, with more than 750 complaints made to the Solicitors Regulation Authority against lawyers in 2008/09.

The SRA has set up an industry task force designed to stamp out such malpractice.

And the Royal Institution of Chartered Surveyors has also admitted that a minority of its members have been involved in application scams.

More broadly, women are said to pose an increasing threat to companies compared with men, as the number of females committing fraud has more than doubled in the past year.

But males are still responsible for committing the highest value frauds at work.

Stewart says: “The growth in this type of crime has outpaced many others – it appears to be something of a boom area.

“And it will continue to afflict the banking sector until the lending community takes serious steps to address the problem.”