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Preventing white collar crimes in organisations

Opinion & Analysis
Workplace integrity is not a new term, but what is the meaning of integrity in the workplace? What does workplace integrity look like in practice? Maintaining integrity at work is crucial for employees at all levels, especially as you continue to move up the ladder. Most business owners, board members, governments and organisations think fraud […]

Workplace integrity is not a new term, but what is the meaning of integrity in the workplace? What does workplace integrity look like in practice? Maintaining integrity at work is crucial for employees at all levels, especially as you continue to move up the ladder. Most business owners, board members, governments and organisations think fraud may happen in other organisations, but not in their place. This is a false notion believe me, as you move up the corporate ladder white collar crimes increase and the only way to reduce it is by upholding workplace integrity. White collar crimes are on the rise, and they can impact their victims profoundly. White collar crime, can be said to be crimes committed by a person of respectability and high social status in the course of his/her occupation. This can be either to obtain money or property, to avoid the payment or loss of money or property, or to obtain business or personal advantage.

Integrity is one of the fundamental values employers seek in the employees they hire. It is the hallmark of a person who demonstrates sound moral and ethical principles at work. Integrity is an inborn moral conviction to do what is right, and reject that which is wrong, regardless of the consequences that are attached to their decisions or environment. Integrity comes in many forms, but the most important characters that are expected at the workplace are dependability, honesty, loyalty and good judgment

Fraud in the context of a business refers to criminal acts that result in a material or financial loss for the company. It can also be defined as the use of one’s occupation for personal enhancement through the deliberate misuse or misapplication of the employing organisation’s resources or assets. It can be fraud by deception or misrepresentation, fraud by the omission or a thoughtful and properly calculated fraud with the intention to benefit at the expense of the organisation. One of the biggest tasks for organisations is detecting, investigating and avoiding employee fraud. Every department presents opportunities for employees to steal and fraudsters gain confidence and willingness to steal larger amounts as his/her fraud goes unnoticed. You can only reduce it by gaining a better understanding of what constitutes workplace fraud and by putting systems in place to combat fraud.

Triggers of white collar crimes at workplaces

Most fraudulent activities are committed due to pressure from the employee and the external environment. Pressure to meet personal targets, pressure of working hard for survival or some personal factors like debt can lead employees to commit fraud. External factors such as family difficulties or pressure of financial support to family can also trigger fraud especially when the cost of labour is less than the cost of living.

Opportunities at workplaces can also trigger fraudulent behaviour. An opportunity of committing a fraud and knowing he or she will go unnoticed provokes the employees to do it. Lack of control systems will further motivate the fraudster to take the step. When the fraud is undetected it can also trigger another fraud, hence it is important to verify and deal with fraudulent activities accordingly.

Common forms of white collar crimes

Data or theft of trade secrets is one type of employee fraud that can be devastating to a company that relies on its intellectual property for its product or service. This type of theft can also compromise the company in a risky position with authorities when personally identifiable information is stolen. Types of data theft can include trade secret theft where information is being stolen to be sold to a competitor. Moreso, theft of customer or contact lists or database can be another form of fraud. This can be done by an existing employee or a departing employee when he or she copies or downloads lists of the company’s contacts to either sell or use.

Embezzlement is another example of white collar crime and it happens when a person entrusted by an employer or another person to handle money or property uses their position to misappropriate funds. An example of embezzlement is when an employee finds ways to funnel company money into their own bank account. Another is when a politician spends campaign funds on their personal expenses.

If accountants in the organisations do not have proper systems and procedures in place they can also manipulate the organisation and indulge in white collar crimes.

This is when an employee manipulates a company’s accounts to cover up theft or uses the company’s accounts payable and receivable to steal or commit accounting fraud. Employees involved in these types of fraud are generally those in positions that have access to a company’s accounts.

They can also present an altered financial report which does not present a true picture for the sake of own financial gain. Personal purchases can also be another example that goes under the accounting department. An employee can use company funds to pay for personal purchases and records the payments as legitimate business expenses in the accounting system.

This is also fraud and the only way to reduce it will be to implement tight internal controls on accounting functions by conducting random audits of account payable and accounts receivable records. The other way to deal with it will be to assign a trusted outside contractor to review and reconcile accounts at regular intervals. Insignificant fraud is common in almost all organisations and it should be known that almost every organisation faces insignificant fraud.

Normally employees do not consider themselves guilty as they think doing this type of fraud does not pose any loss to the organisation. This kind of fraud includes things like stealing office stationery, taking personal printouts, altering the bills which are reimbursed by company. A small fraud by all the employees will together prove to be a big loss to the organisation.

Effects of white collar crimes

It is necessary to take steps to prevent white collar crimes, as it can cause loss of funds or goods in an organisation. Most organisations are operating on a loss not because they are actually on loss; but because fraudulent activities are also contributing. White collar crimes at workplaces can also spoil the reputation of the organisation especially when the white collar crimes are known by stakeholders. Clients and prospects can also lose faith and may not have a long-term relationship with the organisation. White collar crimes can cause high losses to the organisation and will definitely affect the employee’s morale. Internal trust of employees can be damaged, especially when the fraud affects the organisation. Not only the employees will be affected, even the customers can also be affected if they overhear such practices taking place in an organisation. The main reason will be obvious that people want to associate with a company which has ethical employees and follows proper corporate governance practices.

Detecting and preventing white collar crimes

Organisations should establish a zero-tolerance policy which imposes strict punishment for infractions of a stated rule, with the intention of eliminating undesirable conduct. This should also be stipulated in the company code of conduct and also the implications if found committing a fraud. Establishing a zero-tolerance culture is the foundation to fighting fraud and make sure employees understand them well. Strong policies and procedures make your company a less attractive target.

Proactively audit operations and keep an open eye

Proactive and surprise audits send powerful signals that fraud will not be tolerated. We emphasise prevention in our personal health, and you should do the same for your company’s financial health. Regularly conduct fraud risk assessments as an organisation. Fraud risk assessments can reduce the average loss by systematically identifying where and how fraud may occur and who may be in a position to commit it.

Moreso, employers are supposed to keep an open eye to employees in all departments and check randomly on accounts, purchases and sales department. Also, employers should avoid entrusting the entire accounting system to a single person. Assign the task of counting the inventory to someone else other than the person who handles the inventory maintenance. Keep an eye on employees with unusual behaviours.

Organisations are supposed to have stringent rules and policies to reduce fraud and theft. Having strict internal controls helps to identify fraud at workplaces. When you catch the culprit in the act, serious actions should be taken so that the behaviour does not continue.

 Emmanuel Zvada is a human capital consultant and an international recruitment expert. He writes in his personal capacity.