This Is Guernsey

By Tom Edwards

BUSINESSES must be more vigilant about the increasing risk of fraud, a security expert has warned.

Cases such as the recent McCarthy trial, at which a NatWest employee was jailed for stealing almost £10,000 from her employer, are just the tip of the iceberg, said Ernst & Young’s Carl Ceillam (pictured).

‘There are enough stories in the news, but there are many others that don’t make the news. We know of other local businesses which have also been the victim of fraud from overseas. The problem won’t go away – rather, it is expected to get worse.’

In January, Jerome Kerviel was revealed as the rogue trader behind the biggest ever fraud investigation in banking history. He was alleged to have cost France’s second largest bank, SocGen, £3.6bn.

The sum dwarfed the £827m. lost by British dealer Nick Leeson, who sank Barings Bank in 1995.

Mr Ceillam said one of the issues that this and the McCarthy case had highlighted was the segregation of duties.

‘One has to be extremely careful about which roles and responsibilities are granted to those tasked with supervision and monitoring. Otherwise, who polices the police?’

Detective Sergeant Andrew Whitton of the Guernsey Police anti-fraud squad said the increasingly sophisticated nature of business and the systems that facilitate it meant that the risk of fraud increased all the time.

‘The crime has also become more prevalent as islanders find themselves getting bogged down by mounting financial pressures,’ he said.

‘Without doubt, this is the trend we are experiencing and it’s also related to the island’s drug problem.

‘For example, there may be a person who works for a bank whose partner is a drug addict and who’s putting pressure on them to commit a crime.

‘In Guernsey, the courts deal with it in a fairly harsh manner because the finance industry is such a large employer here whereas in the UK sentences for fraud are remarkably shorter than for bank robbery – but in Guernsey, those who are found guilty are looking at significant jail time.’

A 2007 report commissioned by the Association of Chief Police Officers found that the cost of fraud in the UK alone was more than £20bn.

Mr Ceillam said that, as in cases like the SocGen scandal, savvy fraudsters could remain undetected for longer.

Businesses need to tighten up their controls by conducting thorough employee background and credit checks, he said.

‘The high street banks are doing this, but few others bother. The checks need to be updated regularly as people’s circumstances change.

‘Recent cases show that Guernsey is by no means immune to employee fraud and all business must take it seriously. Vigilance and scepticism are vital.’

DS Whitton said employee checks were a crucial measure.

‘In the UK, companies expose themselves to risk because when employees call in sick, the employer often goes to a temping agency for replacement staff.

‘They might assume these people have undergone the appropriate security checks, but this may not always be the case and in fact someone can spend all their time stealing money or confidential information.’

While this might not be such an issue in Guernsey, the island is not immune to the risk.

‘Fraudsters are constantly coming up with ingenious new scams and it’s difficult to keep abreast of all the developments.

‘All we can do is pass on advice and information to the business community of what’s happening as we find it out ourselves, but it’s up to the companies to take the right precautionary action.’