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Fidelity Guarantee
Wednesday, July 1, 2009
Are your employees ripping you off?

While a basic fidelity guarantee is a good idea and a Commercial Crime policy an even better one “the best defence against being ripped off by your employees is to remain alert to patterns of behaviour that may point to fraud,” warns Brian Gillespie of Alexander Forbes Risk Services.

Employers should not kid themselves that employees only steal small amounts. Even large-scale theft starts in a small way with lower to medium white collar employees usually causing the most damage.
“The employee sees an opportunity and, knowing there’s little chance of being found out, steals once and gets away with it. After ensuring there are no repercussions the process is repeated. This can continue for years if the level of theft remains the same,” he explains.
For example, 25 years ago a Personal Assistant at the branch of a Financial Institution in downtown Johannesburg stole two million rand over a period of ten years. It was only when she went on leave and someone else had to do her job that the theft was discovered.
As we see “most thefts or fraud are discovered when the perpetrator is not there,” he says.
Often though the dishonest employee finds that as their ill-gotten gains improve their lifestyles they need more money to finance their taste for luxury goods, gambling or drug-addiction – and this greed can expose them to detection.
Basic precautions that businesses can take include:
• Ensuring all cheques or electronic payments require counter signatures or authorisation;
• Conducting internal audits monthly;
• Shredding old cheques;
• Making sure cash is locked away or properly controlled in tills;
• Compelling employees to take a least two consecutive weeks’ paid leave each year; and,
• Monitoring the lifestyles and spending patterns of your staff

Historically businesses have taken out the minimum Fidelity Guarantee, some as low as R100 000, because they simply don’t believe their employees would rip them off - or could actually steal significant amounts of money.
“But R100 000 is actually very little when one sees the amounts that are actually taken," cautions Gillespie.
The invoicing and billing system for example is particularly vulnerable to theft and fraud committed by white collar employees. This is why “details of the insured’s systems of check and control are disclosed on any fidelity insurance proposal, and insurers check these carefully before agreeing policy terms and conditions,” he notes.

Copyright © Insurance Times and Investments® Vol:22.7 1st July, 2009
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