What is internal fraud?
Internal fraud occurs when a member of staff dishonestly makes false representation, or wrongfully fails to disclose information, or abuses a position of trust for personal gain, or causes loss to others.
Internal fraud can range from compromising customer or payroll data to inflating expenses to straightforward theft. Sometimes it's an unplanned, opportunistic attack purely for personal financial gain, but sometimes it's linked to a serious and organised criminal network, or even terrorist financing.
Increasing incidence of internal fraud
Most staff in any organisation are honest and trustworthy. But the small proportion of insiders who defraud their employers pose an increasing threat. An affected organisation can experience significant financial losses and unquantifiable damage to its reputation.
Staff dismissed for fraudulent activity - or who resign before being found out - can move freely from one employer to another, possibly perpetrating more frauds. In our report Employee Fraud: The enemy within, we warned that "The lack of employee recruitment checks and controls in some organisations lies at the heart of the employee fraud problem. They are the first line of defence in stopping the criminals placing individuals inside your organisation.”
The solution: Internal Fraud Database
Our Internal Fraud Database is a data sharing scheme designed to help responsible employers to minimise the risk of employing a fraudster.
In its National Fraud Strategy, the National Fraud Authority described the Internal Fraud Database as a success in the area of "sharing data within a framework that safeguards people's privacy," and called it "critical to identifying and preventing fraud". It has also been cited as an example of best practice by the Financial Conduct Authority.