How To Avoid Giving Away Money Unintentionally

The following four types of fraud have implications for almost all businesses and we all need to think of ways of reducing the risk they pose.

Cyber Fraud.

There are too many kinds to go into here, but I will mention something I have encountered a lot: Phishing. People send me e-mails with links or attachments that contain viruses or malware. Some of the e-mails are in themselves fraudulent, such as phoney invoices, or begging letters, but even those appearing to be receipts or messages from your bank are dangerous.

If in any doubt, just delete them. If necessary ‘phone you bank or whoever in case they really were trying to contact you.

Ghosts on the Payroll.

I remember a woman who worked in the payroll section of a company. She paid herself a lot more than she was supposed to and then paid her husband and other members of her family a lot of money even though they did not work there. It was eventually discovered by the year-end audit.

· Always design your systems of work so that no one person can add people or increase pay-rates without anyone else approving.

· Do not rely on a once-a-year audit. People should never be sure auditors will not appear unexpectedly.

· Routine cost statements should be produced. Someone should notice unplanned increases.

· A list of payees should be produced every payday and someone should notice any “new” employees.

Car Sales Scam.

A garage owner rented out his forecourt to a stranger who wanted it for second-hand car sales. He paid a a month in advance in cash. There was a “Grand Opening Sale” with massive discounts. Cash only. All the cars were quickly sold.

Soon people came back with complaints about the cars. They were all faulty and not worth even the discounted prices. The dealer was nowhere to be found.

The garage owner found himself on the receiving end of a lot of claims and accusations, of which he was innocent. He managed to defend himself successfully but incurred legal costs and his reputation suffered a lot.

· Beware of anything that seems too good to be true. It probably is!

· Beware of anyone who insists on cash only.

· Always check the credentials and identity of potential business associates, even if you think the association is very “arms-length”.

Motor Insurance Scam.

A broker added elements to genuine claims as he forwarded them to the insurers. These included injuries, additional passengers, and car hire. He always had the cheques or other payments made to him, from which he paid the claimants, keeping large profits for himself. He colluded with:

– A car-hire firm.

– A solicitor.

– A doctor, producing phoney medical reports on demand.

He was aware that different insurers had different practices regarding investigating claims. He always ensured he kept his claims just below the threshold. He was caught when a claimant contacted his insurers direct and was amazed to learn of all the payments they had made to him for his minor accident. He and they went to the police.

Even if you are not in the insurance business, think how this could apply to you. And these are some controls you could apply.

· Avoid letting one person channel all payments through himself.

· Do not have a rigid policy for investigating anything.

· Be suspicious if someone always uses the same subcontractors, e.g. the car-hire firm and the doctor.

· At least sometimes, insist on bypassing the middle-man and speak to the end client.

Do not give away money unless you intend to!

After studying Economics and Accountancy at Bristol University, John worked in accountancy and audit in several types of local authority. He is currently self-employed as JHM Risk Management Services, offering risk management and liability claims-handling services to businesses and other organisations, to enable owners and managers to save time and stress as well as money. John is a member of CIPFA, is a Registered Risk Practitioner with ALARM, and is a Specialist Member of the Institute of Risk Managers.

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