A 55-year-old woman from Aberdeen, has been sentenced to three years and four months in prison after confessing to embezzling over £1.5 million from her former employer, a metal recycling company. Her crime was eventually detected by one of the partners but it took them 6 years. So what can HR do to help combat insider fraud? We’ll consider that.
The case has been widely reported in the media, including Sky News and national press. The High Court in Edinburgh heard how 55-year-old mother-of-four Coleen Muirhead, embezzled the money between June 2015 and October 2021 while working as an administrative assistant at Panda Rosa Metals in Aberdeen. She spent it on lavish holidays and bought cars and caravans, paid for her son's wedding and set up saving accounts for her grandchildren.
HR Review reports on this and explains how she did it. At the time she was an administrative assistant for Panda Rosa Metals which had two sites in Aberdeen that dealt with scrap metal from both individuals and businesses. Muirhead created fictitious transactions, funneling money to a non-existent client. It came to light when a senior partner at the firm noticed discrepancies in the company’s financial records. The partner began investigating a supposed significant customer named G Anderson, only to discover that there was no such client at the Canal Road site where Muirhead worked. An examination of Muirhead’s financial records revealed matching sort codes and account numbers between her and G Anderson. Following her arrest and subsequent police interview, Muirhead admitted embezzling the money.
As HR Review highlights, insider fraud can be a challenging issue to identify, often involving trusted, long-term employees who discreetly misappropriate funds. This problem is especially prevalent in small to midsize businesses and often, as in this case, the crimes go undetected for many years meaning the total amount stolen by the end is often very significant. According to KPMG’s latest research on tis – their Fraud Barometer report – last year there were 36 cases of embezzlement with a value of £100k or more heard in UK courts. .
So how do you spot this type of crime? Andrew Herring is one of the lawyers in our litigation team specialising in complex litigation and fraud-related investigations and earlier he joined me by phone from the Birmingham office to discuss that point. I started by asking Andrew about the warning signs, the red flags that HR should be alive to?
Andrew Herring: “The first one from our perspective is people that are working excessive hours, or who don't take the right levels of annual leave that you might expect. There have been some very high-profile cases over the years, where people have been committing fraud and they don't leave work because they need to be in control of the situation in order to ensure that they're not found out, and that things carry on in the way that they would like them to, and they don't get caught. So, it's always worth just making sure you know if people are working excessive hours, or working odd times of the day, and from a pastoral perspective, you're checking that everything's okay with them but then, also, that it's not a red flag of other things going on. For example, on the holiday point, in some regulated sectors businesses will ensure that people take a mandatory two-week holiday during the course of the year just so that if audits do need to be undertaken about what work has been undertaken, those can be carried out safely. Then there will be other things that that might be warning signs, for example, people using unnecessarily complicated working practices. If something can be done simply and openly and transparently it's very likely to be a quite a rigorous process whereas if people are making it overly complicated, then that just creates potential situations that can be exploited, and we see that quite often in the finance teams within businesses. You know, the invoicing procedures, the authorization procedures, if it's too complicated it gives people the opportunity to commit fraud. I think also, and this is difficult one because there is this huge emphasis on data protection and protecting confidential, commercially sensitive information within organisations but, again, if people are taking steps to keep what they're doing secret in a way, which is not appropriate within the business, that might be a marker that they're doing something wrong that they're trying to hide from their fellow employees or management so that's something to keep an eye on. Obviously, people living beyond their means is usually a big marker. I have dealt with multimillion pound frauds where the thing which has caught the suspicion of the board has been the flash car in the car parked outside the office when everyone else is driving very modest vehicles. So, anything that suggests that - the holidays or anything out of the ordinary like driving flash cars, overly expensive jewellery, that sort of thing. There might be absolutely perfectly justifiable reasons for that, but if it doesn't add up then it's worth just then thinking well, do we need to take a closer look at this individual? Then in terms of when you're thinking about well, is someone, you know, maybe doing wrong doing, we all have very stressful jobs but, actually, a change in someone's personality can sometimes be a marker for people that are doing something wrong because, quite often, the stress of trying to have multiple lives at the same time can actually cause people to behave differently in the workplace and again, from a pastoral perspective, that's something that needs to be looked at and to check that people are okay, from mental wellbeing perspective, etcetera, but it might be the red flag. Then the classic in that area where we have dealt with cases in the past is where employees have a gambling habit and, actually, they start turning to defrauding their employer in order to generate the money they need to maintain their losses on a gambling account and, unfortunately, that is something we've come across a number of times and people's personalities and their behaviours have changed because they're trying to juggle their financial affairs outside of work.”
That report on the case by HR Magazine is called ‘Woman jailed for embezzling £1.5 million from employer: How can HR combat crime?’. We’ve put a link to it in the transcript of this programme.
LINKS
- Link to HR Magazine article: ‘Woman jailed for embezzling £1.5 million from employer: How can HR combat crime?’
