If you suspect that your charity has fallen victim to insider fraud you should act promptly.
- Refer to your response plan which should explain how, when and by whom the suspected fraud will be investigated, reported and resolved. It might include engaging external professional support.
- Report the incident to your relevant national law enforcement agency. In the UK this is Action Fraud (England, Wales and Northern Ireland) or Police Scotland (Scotland only).
- Report matters promptly to your charity regulator. For reports to the Charity Commission for England and Wales treat it as a serious incident. Use the online form to make your report, stating what happened and how you’re dealing with it.
BUILDING YOUR CHARITY’S DEFENCES
Checklist – Ask yourself:
- Do we have a workplace culture in which fraud is never acceptable and everyone knows it? (An essential part of preventing fraud is to have the right ‘tone at the top’.)
- Do we talk openly about fraud and is it clearly explained in our anti-fraud, bribery and corruption policy?
- Is a whistleblowing policy promoted and supported widely within the organisation?
- Are we developing standard operating procedures that reduce risk and encourage honesty? Are we making sure they are being followed?
- Do we perform pre-employment screening of new recruits and in-service checks for established employees? Do we expect our partners to do the same?
- Are we sharing our knowledge with other organisations so that known fraudsters cannot simply job-hop?
- Do we offer support to employees in difficulty? (Desperation and dissatisfaction are common causes of fraud.)
- Do we keep registers of gifts, hospitality and conflicts of interest? Are they transparent and reviewed regularly?
- Do we provide mandatory anti- fraud and corruption training?
- Is there a response plan for when an insider fraud does happen?
Charity Fraud Awareness Week brings together the charity and not-for-profit sectors from around the world to raise awareness and share good practice in tackling fraud and cybercrime.
Getting to know your staff
Performing proper due diligence in all staff and recruitment matters is an essential part of getting to know the people who work for you. It can greatly reduce the risk of insider fraud.
What is Insider Fraud?
This is when someone exploits their role or occupation for personal gain by deliberately misusing the organisation’s assets and resources. It often includes the abuse of trust.
Fraud can be committed by anyone, whether:
- a trustee;
- an employee (temporary or permanent); or
- a volunteer.
This person may act alone or in collusion with someone else. Sometimes criminal gangs will deliberately seek out people ‘on the inside’ to help them commit fraud, for example by asking for information on how to bypass controls.
Certain kinds of individual behaviour can be red flags for insider fraud. For example:
- an aggressive or bullying manner that makes colleagues unwilling to challenge their behaviour;
- a tendency to be over-protective of their work or to take on additional tasks beyond their job description;
- asking to use someone else’s log-in details because they have forgotten their password;
- an unwillingness to take holidays or be away from the office for more than a day or two at a time;
A very useful helpsheet, kindly prepared by Cifas and the Fraud Advisory Panel, can be downloaded here
Case studies of inside fraud in charities can be found here
The concept of unpaid trusteeship has been one of the defining characteristics of the charitable sector, contributing greatly to public confidence in charities. This does not mean that a trustee can never receive any payment or benefit from his or her charity; there are sometimes good reasons why it can be in a charity’s interests to make a payment to a trustee. Trustee boards need, though, to minimise the risks to their charity’s reputation and operation.
Expenses are normally refunds by the charity of costs a trustee has had to meet personally (or which have been met on his or her behalf) in order to carry out trustee duties. In some cases, these expenses may be paid in advance. A refund of properly incurred expenses is not a trustee payment, nor does it count as any kind of personal benefit.
Some types of payment are often confused with expenses, when they are actually trustee benefits which HMRC will consider can be taxed as income. They can only properly be paid out of charity funds if there is suitable authority for doing so.
A charity can pay a trustee for the supply of any services over and above normal trustee duties. The decision to do this must be made by those trustees who will not benefit. They must decide that the service is required by the charity and agree it is in the charity’s best interests to make the payment and must comply with certain other conditions
More detailed information and guidance can be found in this document