Corporate fraud

Fraud happens when someone intentionally creates a false statement to gain benefits in terms of money or position and causes loss to the organisation that relies on them. It is a criminal offence where investigation can provide evidence to prove if a person has committed any fraud or not and if they should be prosecuted. 

There can be three main types of offences: fraud by misrepresentation, where a person misleads or spreads fake information or when an employee or administrator fails to disclose certain key information related to the company where the organisation has a legal obligation to disclose the information. 

It can also happen due to the abuse of position where the person who occupies a critical position in the organisation, who is expected to safeguard or not to act against, abuses his position through the act of omission. 

In all such cases, a dishonest worker or executive aims to make individual gains and causes loss to another or exposes others to the risk of loss. 
 
Such acts are sometimes related to the possession, supplies or manufacture or in conditions when the person obtains services dishonestly. In most corporate offences, the one held for financial crime will be sentenced as per the ten-step legal process of the UK sentencing council. 

The Theft Act handles offences related to false accounting and false statements by the company's directors, and it is considered a punishable offence. There are laws against people who conspire to deprive someone of something which belongs to them or they are entitled to.   
 
Sometimes, firms commit fraud when they claim council funds they are not entitled to, like getting payments for supplies, contracts or grants, or steal resources like stores, equipment, buildings or vehicles, or they claim a single person or non-occupancy or blue badge when the badge holder is not in the vehicle.   

Corporate frauds can be complicated, committed either by the firm or an individual. Nevertheless, it mostly involves cheating where the employee or the firm inflates their profits and modify accounting details to hide the actual position. 

In the latest, due to covid lockdowns, remote working arrangements created difficulty in cash flow, and it increased the probability of such scams, as the firms are not compliant with the new systems and lack understanding of such risks. 
 
All firms are vulnerable to such fraud. For example, large companies participate in bid-rigging, whereas employee transfers funds pretending to be the CEO or manager or someone in the position. 

In addition, there are many firms where the owners and directors work completely on trust, and in many cases, such positions of power are easily abused by one of the partners. 

The employees commit such crimes by generating fake invoices showing duplicate expenses, offering free goods to friends, stealing cash, and these scams do not require any complex cyber tricks. 
 
Some common types are – 

• Account takeover where a malicious individual or party takes over the control of the account of others using malicious methods to get user's credentials, 

• Application fraud can be a type of identity hack where the tricksters try to use the stolen identity of another person,

• A misleading bankruptcy filing can lead to scams, 

• Forged cheque, fake accounting, and invoices involving manipulated account entries, exploiting assets/information of the organisation or misusing the assets. 

• In long and short frauds, firms set up a legitimate business to get customer and supplier investment. 

• Office supply scam refers to sending supplies and seeking payment for them when no one orders for it). 

• Procurement/receipt frauds. 

• Travel and subsistence frauds are committed when the firm sanctions the employee for fake travel bills.

An organisation can prevent it by fostering the culture of accountability, providing training to the staff, encouraging whistleblowing, conducting background checks, directing new employees in the various departments and carrying out various personal / background checks before hiring employees or employing new partners.