Staff fraud and lessons to be learnt – a case study

I was recently told of a fraud perpetrated a few years back by a female employee of a privately owned agricultural group which saw R35 million “deviated” over a relatively short period of time, into the account of her partner which she effectively controlled/managed and had ready access to.

The perpetrator was a well qualified financial person but had elected to work in a junior accounting role at the group she defrauded. It later came to light that this was a conscious decision on her part and that she had been dismissed under dubious circumstances from two previous employers. She had realised that the more senior financial positions in large groups would involve formal reference checks as well as better background checks. These processes were largely absent in a smaller group and she was comfortable that she could easily handle a personal interview process. A junior general role in an informal less structured organisation would also give her more leeway to be flexible, perform multiple roles and circumvent the financial controls and segregation of duties found in larger groups.

Despite continual upgrades and improvements being made to her home and the purchase of two brand new 4x4 landcruisers vehicles, no concerns were raised or lifestyle checks performed as she told everyone that she had come across an old life policy of her late father which had not been claimed or paid out and which had been the source of her new found wealth. This unclaimed policy had been compounding interest for years leading to its supposed enhanced capital value. The couple were also very generous and hospitable, further diverting any suspicion.

She died unexpectedly in a freak accident after falling over a balustrade from the mezzanine level of her luxurious home while sleep walking.

Her employer was highly supportive of her surviving spouse and family, and wanted to assist with funeral and other essential expenses and chose to make the partner an ex gratia payment in this regard. When they came to make the payment and load his bank account details on their banking system, they found that his bank account was already loaded as a beneficiary. This immediately raised suspicion as he was neither an employee nor a creditor of the business. This then led to the unravelling of the fraud and the extent of the diversion of legitimate creditor payments to his bank account over a period of time.

He and her son both received gaol sentences for aiding and abetting the crime and for denying any wrong doing in being willing accomplices. To this day, the husband still denies any knowledge of the source of the proceeds laundered through his bank account.

Lessons to be learnt:

  1. The need for robust financial controls and in particular a clear segregation of duties particularly as it relates to bank accounts, banking systems and the addition of beneficiaries and release of payments.
  2. The addition of payment beneficiary bank details against original source documents and formal verified beneficiary correspondence.
  3. The release of creditor payments against original source documents.
  4. The need for regular reconciliations particularly of bank accounts, creditors and payroll.
  5. The need for robust HR procedures notably around recruitment, vetting and independent background checking irrespective of the position being filled.
  6. The need for the monitoring of high risk employees.
  7. The need for regular lifestyle checks.