Do away with career criminals!

How are South African companies avoiding the threat of fraud in the workplace? BLAIR BURMEISTER speaks to those in the know about solutions to prevent and filter out potential fraudsters.

In South Africa, the subject of workplace fraud is common. With the high level of unemployment motivating the likes of résumé fraud and organised crime syndicates targeting vulnerable employees, companies are being forced to adopt ways to root out trouble-makers.

A substantial portion of the problem is attributed to South Africa’s multi-billion rand security industry. Bernardo Luis, operations director at Guarding South Africa, has sounded a warning to both security companies (and the companies that utilise their services), that improved screening has to start taking place if there is any chance of stemming the massive rise in business crime that has occurred since 2004.

“Guards fall asleep on the job, work in cahoots with organised syndicates and turn a blind eye to goods that are transported out of warehouses,” he says. “People put too much trust in guards who are constantly bought or enticed by syndicates or dishonest employees operating within a company.”

Luis says an influx of fly-by-night companies into the guarding sector is severely compromising the delivery of services. “These companies don’t employ suitable guards and often pay below the minimum wage stipulated for the industry, increasing the temptation to commit crime.”

He advises: “It’s time to get back to basics. All companies need to be registered with the Private Security Regulatory Authority (PSRIA) as stipulated by the Private Security Regulation. The PSRIA website provides an online and easy way to check credentials. It’s a legal requirement for companies who employ outsourced security guards to ensure they are registered with PRISA.”

Another way to combat crime is to obtain references from other clients before hiring guarding companies. Luis says it’s important to investigate the operational and managerial systems of these companies to make sure they both pre-screen and constantly monitor staff.

Justicia Investigations’ polygraph expert, Frans van Biljon, reveals that a security company recently approached him for assistance with a theft problem. Polygraphs were used and it was established that a security guard, who was holding a position of trust, was recently released from prison for armed robbery. The guard was operating with a valid PRSIA certificate – believed to be a fake.

A workplace polygraph test is nothing like the controversial “lie detector test” depicted in the movies. It’s a sophisticated system that brings together a parcel of issues connected to the candidate. These include graphs, charts and a host of verbal and non-verbal communications.

Van Biljon says: “The size of the sector and the ease with which new entrants can be trained and absorbed into it, often results in fleeting employee loyalty with guards moving from company to company, should they be dismissed for misdemeanours.”

Luis adds: “The crux is the screening process. Every person who applies for a job at Guarding South Africa undergoes a polygraph test prior to employment and periodically thereafter. We also have a crime prevention team that carries out spot checks and inspects regularly.”

“But it’s still very worrying that, on average, 98 percent of applicants for guarding jobs fail the initial polygraph,” he says. “Many are found to have been dismissed from previous jobs for dishonesty or are even wanted by the police. A lot needs to be done in the guarding sector. Companies and clients need to pull up their socks and participate in the cleansing process.”

Van Biljon says that although many employees in high-risk industries are dismissed as a result of disciplinary action, most companies don’t prosecute. This means that they are not black listed and don’t have criminal records, so any checks come up blank as a very low percentage of criminal charges actually end in prosecution.

As commercial crime continues to rise, syndicates target vulnerable businesses and applicants manipulate résumés and references. According to the experts, the number of employers using polygraph testing to screen job applicants has increased dramatically from 10 percent five years ago, to up to 60 percent today.

Reg Horne, MD of Justicia Investigations, says: “The reason for this is that prevention is easier and far cheaper than solving the problem further down the line.”

Van Biljon says that polygraph tests don’t just uncover major crimes. They often pick up drinking and drug-related problems as well as petty offences. “It is important to remember that if an employee is inclined to steal even a small item, if left unchecked, it could lead to them committing more serious offences in the longer term.”

 The awareness of employee lifestyle and behavioural patterns is the key to investigating a significant deterioration in work or home situations that could affect the financial well-being of an employee.

In its 2007 report, Profile of a Fraudster, KPMG revealed some of the typical behavioural red flags which may indicate that an individual could commit fraudulent activities. These included: instability in life circumstances; past legal problems; complaints about inadequate pay; past employment problems; addiction problems; irritability; and suspiciousness or defensiveness with a wheeler-dealer attitude.  

Fellow polygraph expert, Willem Marshall, warns companies that there is a great deal of organised crime out there: “People infiltrate an organisation by working there – intelligence is everything and criminals share information.”

He adds that crime in the transport sector is also rife: “Syndicates either attempt to bribe and intimidate drivers and their assistants or actually place members in companies as employees. Often thefts are reported as hijackings. In some cases, we find that the driver is involved and are able to recover millions of rand’s worth of stolen stock.”

On top of that, the abuse of fleet cards is resulting in significant financial losses for fleet operators. Due to the common nature of the crime, Standard Bank developed technology to reduce illicit transacting and avoid potential losses for operators.

Dr David Molapo, head of fleet management at Standard Bank, says at the end of last year the bank’s fleet customers were saved an estimated R15,3 million in potential losses through its online authorisation system.

He explains: “The system ensures that each card transaction is validated and authorised at the point of sale. Where transactions appear to be out of the ordinary, fleet operators are alerted immediately. They can then check the circumstances surrounding the transaction and either approve or decline it.”

A transaction will be rejected automatically if the card user is attempting to process a purchase that is not aligned with the vehicle’s particulars recorded on the system.

Molapo says aberrations detected and declined usually include same day fill-ups within short timeframes that exceed the tank capacity of vehicles, or illicit use of lost or discontinued cards. He says that opportunities for using cloned cards to make any sort of transaction are being progressively shut down by the system.

Carol McLoughlin, executive director of the South African Fraud Prevention Society, notes that fraud is an unpleasant and expensive reality for businesses and warns that every organisation must realise and acknowledge that it is at risk of the adverse consequences that follow.

“Failure to implement robust internal controls creates an environment that is ripe for an employee to commit fraud,” she cautions. “Employee fraud is about opportunity and organisations have to take the appropriate steps to shut out these opportunities.”

She says that adopting a strong resolve to combat internal fraud is vital. “Make it clear to employees that the organisation has a zero tolerance attitude for fraud of any sort.”

She adds: “A more systematic approach to storing and leveraging employee activity data to proactively identify potentially fraudulent behaviour is something that should be considered by more progressive organisations.”