Steal more and more at work


South Africa’s lack of capacity and resources to curb organized crime seems to be embodied in the increase in employees who cheat their employer out of money.

According to the Employee Fraud Report, issued by the Association of Certified Fraud Examiners (ACFE), 188 cases of organizational fraud were reported in South Africa in 2022, more than any other sub-Saharan African country.

In this region, ordinary fraud accounts for 62% of all cases, with the majority (48%) of these being eventually exposed through “tips” from employees.

While employees (40%) and managers (40%) commit the most cases of employee fraud in the region, owners or CEOs gain the most “profit” (on average $215 000 or R4 million) from this type of fraud.

On a global scale, South Africa also ranks seventh out of 193 countries, with Nigeria in sixth place and Congo in fifth place, according to the Global Organized Crime Index.

According to the Africa Organized Crime Index, South Africa ranks fifth out of 54 countries on the continent in terms of its rate of crime.

According to Christo Snyman, chief executive of CS Forensics, the nature of organized crime in the country varies, but includes financial crimes such as money laundering, corruption and tax fraud, “which is a lot of what we see unfolding in employee fraud”.

Devastating effects

“In light of the potentially devastating effects of these crimes and the far-reaching consequences of reputational damage, South African companies must become aware of the pitfalls that this poses for businesses,” says Snyman.

Snyman explains that the detection and prevention of employee fraud is not only about protecting an organisation’s bottom line.

“It is also about maintaining the trust and credibility that forms the foundation of any successful enterprise. For South African companies, effective risk mitigation strategies can go a long way in preventing employee fraud from spiraling out of control.

“In combating cases of employee fraud, constant vigilance is a best practice principle that must materialize as robust internal control measures. Additionally, forensic audits and investigations performed by third-party service providers are key components of the fraud detection and prevention process,” says Snyman.

Payroll fraud

Snyman deals with some of the most prominent types of employee fraud in South Africa’s corporate environment. He refers to a recent case where an employee of a travel management company was employed by a retail service firm and defrauded both companies out of more than R500 000.

A member of the company’s management team came across suspicious salary payments and other payroll-related crime.

Snyman explained.

“When we reviewed the multiple documents and assessed the company’s financial records, we found that the employee had manipulated the firm’s payroll system to avoid having PAYE tax deducted from her salary.

“She also withdrew from the company’s provident fund to ensure that no deduction was made from her salary – an action that was taken against company policy.”

The employee was also found to have approved other payroll-related funds to be allocated to accounts fraudulently created on behalf of fictitious employees.

Cases like this offer important insights into the seriousness of payroll fraud, Snyman believes.

“Some of the most common ways this type of fraud is perpetrated is by paying ‘ghost employees’, falsifying hours worked or creating fictitious overtime used to inflate paychecks.”

To combat employee fraud

Snyman recommends measures such as regular surprise audits, conducted with sufficient frequency to uncover inaccuracies or inconsistencies that could indicate fraudulent activity.

“In addition, it is essential for companies to pay special attention to the payroll system, by carrying out regular checks, especially when employees leave the company. Keeping systems and employee files consistently updated is essential for accurate financial records.”

A careful examination of bank statements is equally essential, explains Snyman.

“Verifying the details of bank numbers ensures that funds are channeled to the correct accounts. Furthermore, the implementation of a payment audit trail will add an additional layer of scrutiny to the process, enabling a comprehensive overview of the accounts into which money is deposited.

“In cases where suspicions arise, the importance of forensic imaging and analysis cannot be overstated. The acquisition of the company’s laptops and mobile phones for this purpose is a critical step. The process involves an in-depth investigation of e-mails, documents and an analysis of the payroll system to determine what has been paid and what remains unpaid,” says Snyman.