by Jenny Reid
Employee fraud, previously called Insider fraud refers to when an employee of your company lies or steals from the company, this could refer to stealing money, maliciously taking access to company assets, or even workplace recognition. Any kind of fraud can negatively affect a company, but employee fraud is becoming a bigger concern than it has been in the past.
Vodacom has recently announced that they have a zero-tolerance policy with regard to employee fraud and had dismissed 630 employees and contractors for fraud over a period of 12 months. If Vodacom, a telecoms giant, is having employee fraud problems, it’s safe to say, that no company is truly safe.
It has often been said that employee fraud is very likely the most common form of financial fraud in South Africa and a recent study revealed that the average cost of an employee fraud case is $117 000, which, as of the 24th of June 2024, is R2,105,842.05 in ZAR.
Whilst good auditing practices will help uncover such fraud cases after the fact, it is essential that companies aim to prevent fraud from occurring before it happens. It is also essential that companies put strategies in place to ensure they do.
Experts all agree on the following principles to prevent fraud:
Implement strong internal controls
Conduct routine internal audits
Monitor employee activities and transactions
Employ regular lifestyle audits
The only policy agreed upon for proactive employee fraud prevention was efficient employee screening policies and background checks.
Jenny Reid of iFacts was asked what she believed would be the most effective check to assist companies in preventing employee fraud and she stressed that “there was no one particular check that would be the golden check”. She said that “any company would need to address the risk profile of the positions in their business and assign effective risk prevention checks to the position”.
These checks would need to form part of the company employee screening policy which should be reviewed annually and agreed to by the entire C-suite. A few hundred Rand to screen a potential employee seems a small and worthwhile investment, compared to a loss of over R2 million for every employee fraud legal battle.
The checks that can be done on various positions can be reviewed on our website. Whilst some checks seem to be the answer to any risk prevention the company would also need to consider the legal requirements when conducting checks and in South Africa today there are several legal requirements for doing checks.
They are:
Constitution of South Africa
Labour Relations Act (LRA)
Employment Equity Act (EEA)
Basic Conditions of Employment Act (BCEA)
Protection of Personal Information Act (POPIA)
National Qualifications Framework (NQF) Act
Occupational Health and Safety Act (OHSA)
Criminal Procedure Act
Credit Reporting Act
Sector-Specific Regulations
iFacts can assist. Hire with confidence, hire with iFacts.
Jenny Reid is a Human Risk Expert and Professional Speaker, and the owner of iFacts based in South Africa, a specialist employee screening and vetting service. She is constantly assessing new and innovative ways to remove the people risk in any organisation. Since 2009 when she took over iFacts completely, she has seen the company double in size and hopes to continue this growth. iFacts specializes in employee Screening, risk assessments, employee wellness, investigations, and truth verification. Jenny is a past President of the Security Association of South Africa. Contact Jenni via email jenny@ifacts.co.za
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