25 June 2012

Summer of sport presents open goal for business fraud

Britain's exceptional summer of sport will captivate the nation for much of July and August, but it is also an open goal for fraud that is likely to cost Scottish businesses hundreds of millions of pounds, a leading forensic accountant is warning.

David Bell, Head of Forensic Accounting with Haines Watts in Glasgow, says that there is a usually a marked increase in fraud during the summer when business owners are on holiday. However this year, with the European Championships, Cricket, Wimbledon and the Olympics, plus the normal sporting events, there is a heightened risk that management will have their eyes ‘off the business ball’ and their businesses will be at greater risk than usual.

He said: “The friend of the fraudster is complacency, poor systems and inattention. In the vast majority of cases that we see, the fraud is committed within the business. Fraudsters usually plan a fraud for some time and they will take full advantage of any opportunity where security measures and systems are compromised. The summer of sport is such an opportunity. We would urge business owners to ensure they have reviewed their safeguards before the summer break.”

It is estimated that business and public sector fraud will amount to around £66 billion during 2012 (source: government figures), of which business fraud is expected to reach £45 billion. Haines Watts estimates that business fraud in Scotland will reach around £2.3 billion during 2012 (or around 5% of UK total). Signs of potential business fraud include:

• Staff staying too late too often - perhaps with access to secure data.
• Unusual relationships with suppliers - where kick-backs can happen.
• Staff in key roles without management supervision - and open to temptation.
• Expensive cars and lifestyles that realistically cannot be funded.
• Staff showing signs of high stress.
• Staff not taking holidays.
• Customers or suppliers only wanting to deal with one specific person every time.

David Bell added: “It is not uncommon for businesses to lose several hundred thousand pounds before becoming aware that funds are disappearing, particularly if they have a large turnover. A business is a complex organisation and fraud can and does happen at all levels and sometimes in the most unexpected manner. The best systems are only as good as the people monitoring them, so the watchword really is to ‘keep your eye on the ball’.

Haines Watts has just launched a ‘Summer of Sport Business Fraud Health check’ - a quick audit of systems and processes for any business worried about fraud risk.

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