South Africa has seen an alarming increase in white collar crimes over the past decade. According to Statista, commercial crimes in South Africa have increased by almost 50 percent since the 2013/2014 reporting period, from 76,744 per year to 112,592.
The past year alone has seen a 10.3% increase.
Allianz Commercial says it has seen a similar increase in the number of commercial crime claims from its clients where one or more of the company’s employees were implicated.
The insurer says that while a variety of circumstances often give rise to such crimes, one thing most victims have in common is vulnerabilities in their processes for procurement and the monitoring of invoices, purchase orders or manual payments.
“The familiarity that often accompanies the frequent operation of the systems used in these areas, unfortunately, avails employees’ opportunities to best identify and capitalise on any vulnerabilities in the same,” says Mukondeleli Masiza, Complex Claims Handler at Allianz Commercial.
Masiza added that although it’s impossible to completely eliminate the risk of theft or fraud, thorough vetting of employees can significantly reduce the risk for commercial entities.
“Whilst there may be a cost attached to criminal, credit, and employment background checks, the prevention of capital losses and reputational damage in the long run is immeasurable,” Masiza said.
However this is only the first step in mitigating risk. Companies are also encouraged to implement vigorous internal controls and procedures, depending on the nature of the business. According to Masiza, these measures should generally include:
- The establishment of a centralised audit and compliance department.
- The regular performance of internal and external audits of financial systems and processes.
- The ongoing training of staff working in audit and risk departments.
- The segregation of duties and having multiple employees review invoices, purchase orders and payment approvals. For instance, one staff member could be responsible for loading beneficiary details and another authorises and releases internal and external payments.
- The prior telephonic verification of banking details as well as follow-up phone calls to intended recipients to ensure the funds have in fact been received.
- Restricted access to computer systems, data access rights, user authentication as well as regular password changes.
“Whilst the above may go a long way in limiting company exposure, it is important to remember that the perpetrators of these types of crimes are au fait with the applicable system and processes and are therefore scrupulous, brazen, and often undeterred, even in the face of possible apprehension, job loss and prosecution,” Masiza concluded.
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