News

Fraud claims on the rise

Release date: 20/1/2009

The economic downturn has seen a big rise in the number of suspected business frauds coming to light, spectacularly highlighted by the criminal investigation into Bernard Madoff's £33 billion share dealings - but they are simply another impact of the recession, says dispute resolution specialist and partner Barry Jervis.

He believes the increased prevalence of fraud reflects a greater determination by business to closely scrutinise all contracts and keep a tight hand on cash flow during this difficult time, while the credit crunch's day-to-day toll may also be tempting some staff towards fraudulent dealings.

He says: "As the economic situation worsens and times become more and more difficult for all, the temptation will of course be much greater for employees, or directors, to engage in fraud as a way to help to make ends meet. This can take the form of dummy contracts, bogey invoices, or even simply swiping modest sums out of petty cash. For many in this situation, such activities are wrongly seen as being less serious than a straightforward instance of theft.

"Add to this, the fact there's been a prolonged period of outstanding economic growth during the past few years, which has meant many well-performing companies have never felt the need to carefully scrutinise themselves. But this has now completely changed with businesses now forced to slash overheads and tighten their belts whenever they can. This in turn is leading to a rising number of frauds coming to light as firms become more vigilant.

"Fraud has always been with us. It's just that examples are more likely to come to light in these challenging times as businesses struggle and are obliged to vigilantly monitor their books, accounts and assets."

Jervis urged firms to ensure they adopt robust internal practices to prevent fraud taking place, regardless of the economic climate.

He adds: "It could make the difference between a business surviving or failing. More than ever, companies need to carefully keep a rein on their expenditure levels and be aware of anything out of the ordinary, be it defective invoices, woolly contracts or suspicious transactions that may sound a warning signal. More importantly, businesses need to safeguard their position by acting on any warning signals and tackling fraudulent matters as soon as they come to light."