The rise of fraud and dishonesty claims – are you susceptible?

As a recruiter or umbrella company, you may feel that you have secure enough processes in place to escape fraud and dishonesty scams. But are you fully aware of the types of scams you might be facing?

The last few years have seen a significant rise in what is known as ‘CEO’ fraud, a scam targeting low-level employees by posing as a manager giving order to authorise a payment. Dishonesty scams are on the rise, and perhaps more worryingly, can arise internally from inside your company, or a company you rely on for contractors or freelancers2.

Dishonesty fraud

Take a look at this simple example of dishonesty fraud, and ask yourself, would something like this slip through your company’s processes?

A contractor submits timesheets with more hours than have been worked. The worker will now be paid for hours they have not done and if discovered, it can be difficult to prove and recover the losses, even if the contractor is dealt with in the courts.

Remember, in this scenario, it is your company’s responsibility to ensure the time sheets are checked, have been approved by the relevant people and that the signatures are correct. Some contractors may fraudulently sign off approval from managers themselves. It’s good practice to double check with whoever it is that signs time sheets off, either by email or phone, before proceeding with payments.

Of course, umbrella companies/payroll providers can face even more complex fraudulent scams that involve more than one dishonest party:

A payroll provider is approached by a contractor, asking for them to deal with their payroll. They advise they have been doing work via an agency and ask for the payment to be processed for work already completed.

The payroll provider receives a cheque from the agency so that they can process the contractor's wage. As the original payment is made via cheque, this shows in the payroll providers system and they pay the worker.

The payroll provider then discovers that the cheque has bounced and the agency and the contractor disappear, or sometimes, the contractor is genuine but the work has been fabricated to the agency, meaning both the agency and payroll provider have been defrauded.

The key here is to always ensure that incoming payments clear before releasing money to external contractors. Another red flag is a contractor appearing out of the blue, with a lot of work already completed and not paid for. It may be genuine, but without the proper background checks you could end up in the unfortunate position demonstrated above.

CEO fraud

CEO fraud though, is more strategic, better thought out and often more likely to slip through your internal checks – particularly in its pattern of targeting low-level employees who are more likely to respond to orders that appear to come from management3.

Know the warning signs:

CEO fraud is done through emails. Make sure that you and your staff know these warning signs, so you can prevent being fooled by fraudulent emails4:

  • Look-alike email addresses: the human brain is very good at reading jumbled letters. Always be sure to double check the email address before sending payments. johnsmith@toptips.com for example, is different to johnsmith@toqtips.com.
  • Exceptional circumstances: fraudulent emails will often imply that the sender is in a meeting, or away and can otherwise not be disturbed. Never make a payment without secondary validation.
  • Urgent tone: don’t be fooled by an urgent tone. ‘ASAP’ is not the same as immediately. No payment should ever be rushed through5.

Other preventative measures you should be taking:

  • Large payments (for example >£1000) should only be paid after a verbal discussion with the person requesting the payment6.
  • Consider what information is publicly available about your business and whether it needs to be public7.
  • Ensure that all staff are educated about fraud, not just your finance team8.

To learn more and learn how to protect your business, contact our specialist recruitment team at Jelf.


1. https://www.actionfraud.police.uk/news/action-fraud-warning-after-serious-rise-in-ceo-fraud-feb16
2. http://insurance.dwf.co.uk/news-updates/2017/09/fundamental-dishonesty-goes-beyond-claims-in-the-fast-track/
3. https://www.cio.com/article/3136159/security/how-to-prevent-ceo-fraud.html
4. http://www.bbc.co.uk/news/business-39429819
5. https://lifars.com/2017/05/increase-ceo-fraud/
6. https://fraudwatchinternational.com/expert-explanations/what-is-a-bec-scam/
7. https://www.actionfraud.police.uk/news/action-fraud-warning-after-serious-rise-in-ceo-fraud-feb16
8. https://www.actionfraud.police.uk/news/action-fraud-warning-after-serious-rise-in-ceo-fraud-feb16