Finance workers and fraud - What to do in a fraud investigation?

Fraud is big business, and rarely does a day go by without a major financial fraud being unmasked in the news. Finance workers are on the frontline in many of the major banking fraud investigations, and yet there is little known about the role finance workers should play in fraud investigations or the extent of their liability for involvement.

Fraud is defined in the Fraud Act 2006 as an offence committed either by false representation (lying), failure to disclose information (not telling the truth) or by abuse of position. Fraud law makes it an offence when someone knowingly acts in a dishonest way, with the intent of making a gain for themselves or inflicting a loss on another. 

Financial services companies are under additional obligations to prevent fraud, by virtue of their position that places them at greater risk of harbouring fraud. These obligations include the broad responsibility to ‘take reasonable care’ in establishing effective systems to ensure compliance with anti-fraud law. Thankfully, much of the legal obligation lies with companies themselves to put in place anti-fraud processes, to ensure that staff and teams are separated to reduce the likelihood of fraud, and to foster an environment where staff are encouraged to blow the whistle when they suspect fraud is taking place.

Firms regulated by the FSA are obliged to report suspicious activity, however this obligation does not necessarily extend down to individual employees, although in some circumstances some employees may be covered by professional obligations in relation to fraud.

Finance workers should report suspected fraud, and should do so in accordance with their company’s policy on notifying management of suspicious activity. They should do so with the full protection afforded to them by the Public Interest Disclosure Act 1998, that protects a whistleblower from detrimental treatment by their employer as a result of making a disclosure. Where financial workers do find themselves unfairly treated as a result of highlighting possible wrongdoing, the Public Interest Disclosure Act 1998 allows them to bring a claim for damages. It is worth noting however that this act does not cover self-employed finance workers.

All finance workers are advised to cooperate fully with any internal or external investigations into fraudulent behaviour or fraudulent activity. If suspected personally of involvement with fraud the requirement to cooperate becomes absolute. The law requires you to be conscious of your effort to defraud a victim, and in many cases a finance worker may simply have been a pawn in a fraud committed at a more senior level. In any case, take expert legal advice from an independent lawyer prior to any involvement in an investigation. 

 

This article for GAAPweb was contributed by

 

To find out more on your flexible working rights, please visit Contact Law by clicking here

 

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How Will the Basel III Accord Affect the Banks?

On September 12th 2010, the Basel Committee endorsed the next piece of their master plan. Having originally released details on July 26th 2010, the Basel III Accord was revealed and aspired to once again make the banking system safer by putting measures in place to avoid a repeat of the “worst recession in over 100 years” (Ed Balls, Shadow Chancellor).

The Basel II Accord was originally introduced in June 2004 to ensure that savers’ money was protected and that banks had a bit of a cushion to absorb unexpected shortfall from the potential inability to repay loans. Basel III was constructed using the same three-pillared framework, but was developed following the credit crunch. It strengthens the bank’s capital requirements and introduces new regulatory requirements on liquidity.

Basel III looks to define new capital target ratios, or the amount of ‘ready’ capital a bank must have. Other changes include the increase in transparency, quality and consistency of the capital base. The new regulation states that banks must have available capital equivalent to 4.5% of assets. There is an additional requirement of 2.5% which is in place to withstand future stress.

The second major change from Basel II is the additional strengthening of the capital framework’s risk coverage. This includes strengthening the capital requirements for counterparty credit exposures, by raising the capital buffers to allow for these exposures. All the changes are in a bid by the committee to encourage the banks to raise their own capital buffer in times of a good economy, so they can be called upon in more troubled times.

Following the crisis of 2009, the banks are now working much closer with the regulators to ensure that it is not repeated. But, in reality, how will the banks and their recruitment processes be affected by the introduction of the Basel III Accord?

The long-term benefits speak for themselves: an estimated net benefit for European banks of 30% of GDP, equivalent to 10 trillion Euros. This prediction by UK economists comes on the back of the sizeable buffers that the new Basel mandates all major banks have at their disposal.

Having said this, the short and medium-term problems cannot be ignored. While the big banks are no longer ‘able to fail’, the IT implications and integration costs and resources threaten to drive down the financial sector’s profits.
 
Although the capital requirements are being introduced gradually, the scale of the change that banks will have to go through cannot be underestimated. Barclays are in the process of raising £3.3bn in order to cover the costs of Basel III – some of which will be used to cover the capital requirements, but a large amount will be spent on retraining and recruiting qualified staff. 

The next piece in the Basel jigsaw will surely lead to increased hiring levels to accomodate the changes.


Oliver Gale is a Change Management Consultant for Marks Sattin.

Corporate Advisory

Looking back on 2010, the general trend witnessed across advisory services was one of an unpredictable market. The pressures of a global downturn, a General Election and bad weather inevitably meant that businesses moved cautiously; 2010 was most definitely a year of peaks and troughs.

Towards the end of 2010, and certainly within the first quarter of 2011, confidence in the market has improved. There has been increased activity within corporate recovery, insolvency, forensic accounting and corporate finance. A fresh excitement seems to have entered the market and this has had a huge impact on recruitment.

Forensic clients are definitely feeling optimistic about this year, although 2010 was a reasonable year within the London Forensic world. There were, of course, points in the year when activity was concentrated on pitching for new work and initial investigations, but the decision to litigate was being held back. This was coupled with the fact that a number of government agencies were holding back work until the new fiscal year. Although this would have ordinarily caused caution, it was balanced by the fact that financial services work increased.

Moving into 2011, we continue to see clients recruiting for increased FS and Fraud work. There seems to be an appetite for AML, FS and Fraud experts alongside the usual Forensic, Valuations and Investigations applicants. Clients have reported that there is a lot more litigation work happening. A good sign that the market is becoming busier is that some clients have been proactively recruiting recently qualified auditors to train within Forensic Accounting.

The Insolvency and Restructuring world saw peaks of activity. There was a marked increase within the restructuring world; some teams were working to full capacity last year. Towards the second half of the year there seemed to be a lot of lender led, Business Review and restructuring work. This has of course meant we have seen an increased need for experienced restructuring candidates.

Clients have recently been recruiting at all levels; from newly qualified to director level. The insolvency world had some very busy periods in London but there seems to be a lot less trading administration work. November and December were quieter than usual.

The first quarter of 2011 indicates that the insolvency world is picking up. A number of firms have been busy in investigations and formal insolvency. It is felt that with the Tax Year end and the quieter-than-expected Christmas results in the retail market, the formal insolvency world will be busier this year.

All indicators suggest that clients are preparing for a busy 2011 – we have already seen firms recruiting across the board.



Shaila Verma is an Executive Consultant within the Marks Sattin Practice Division, specialising in Qualified Corporate Advisory Recruitment. She has successfully recruited for senior appointments both in C&I and Public Practice and has over 10 years’ financial recruitment experience.

What’s the Going Rate for Freelance Accountants?

Freelance accountancy rates are squeezed while finance remains an attractive sector for freelancers and temps.

Twice a year I get to crunch all the numbers that come out of all the data we hold on our systems for umbrella contractors. The trends that are uncovered always throw up some useful stats and lead to some interesting conversations around the office.

The findings have shown that the average hourly rate for umbrella contractors has fallen in the last 12 months from £34.41 to £33.12; however, contractors over 35 are typically £10 an hour better off than their younger counterparts.

The accountancy sector remains an attractive sector for contractors, temps and freelancers; the average hourly rate remained slightly above average at £33.16. However, this time last year the average hourly rate for accountancy temps working via an umbrella company was £35.36. So freelance accountancy professionals are feeling the squeeze just like everyone else.

The study also found that:

• Greater London and the South East remain the best places to contract in the UK based on hourly rates, with both regions seeing slight increases. Rates in Greater London have risen from £36.16 to £36.88 and in the South East from £36.64 to £36.74.
• The lowest average rates can be found in the East Midlands (£25.81) followed by Northern Ireland (£27.25) and the North West (£28.64).
• The Oil industry enjoys the highest average hourly rate at £90 followed by Construction (£59.50), Finance (£48.37) and Healthcare (£45).

In contrast to the rest of the UK’s labour markets, the study suggests that rates do get better with age for freelancers. The average rate in the 25 to 33 year-old category is £28.68, compared to £37.09 for 35 to 44 year-olds and £37.21 for those aged 45 to 54.

You can attribute the drop in rates to the state of the UK economy; however, it’s hard to explain why there’s a gender gap in umbrella contracting. Many industry commentators often put it down (rightly or wrongly) to factors such as women taking a break from their career to have children. I’m not so sure this stands up in the profession and it definitely doesn’t in contracting. Surely a hirer is engaging a contractor because they have a specific skill set and the going rate for that skill set is market led?

The age difference is perhaps more straightforward. The older a contractor, the more experience they have and this is reflected in the rates they can command as they secure more senior roles. So unlike the rest of UK Plcs, age appears to be a benefit for professional accountancy freelancers and contractors.

I firmly believe that freelancers have a massive contribution to make to the UK’s economic recovery. Over the last two months we’ve seen an increase in the number of contractors making enquiries with us, so prospects are picking up.


Rob Crossland is the Chief executive of the Parasol family of companies, which also includes ClearSky Accounting, and provides umbrella PAYE services to over 9,000 freelancers in the UK.

A Serious Approach to Social Media

Allowing employees to use social media at work can create benefits for an accountancy firm, especially if rules and expectations are set up front.

The use of social media is rapidly transforming the way we communicate and conduct business. While some firms have been quick to embrace the Web 2.0 way of working, many others are taking more of a wait-and-see approach. Often, their caution is linked to uncertainty about what impact social media might have on workforce productivity.

A recent survey conducted by Robert Half’s U.S. operations revealed that more than half of Chief Financial Officers (CFOs) worry that their employees will waste time if allowed to use social media while on the job. Eighteen per cent cited unprofessional behaviour as a top concern. However, when asked about benefits, 3 in 10 CFOs said social media would allow their teams to provide better customer service. Enhancing the firm’s reputation, expanding contact networks, and securing new business were also seen as potential rewards.

If your firm is thinking seriously about making social media an everyday business tool for your employees, here are some tips that will likely help you both preserve workforce productivity and realise positive returns:

Let your employees know you trust them

There may be some risk of lost productivity in allowing your team to use social media during the workday, but you still need to trust that your employees will keep their priorities straight.

When opening the gates to social media at your firm, make it clear that you expect performance standards to be maintained – if not improved. Communicate big picture business objectives to your team by letting them know why the firm wants to make better use of social media. For example, you want to improve customer service, recruit new talent, or improve collaboration among employees.

 Also, resist the temptation to over-monitor your employees; many will resent your implication that they can’t responsibly use social media – and their time at work.

Develop a social media policy

Leading companies have written acceptable-use policies that outline what employees can and cannot do when using company equipment, such as computers and mobile phones. Many businesses today have adapted their policies to include specific rules about internet and social media use.

Work with your HR, legal and IT teams to develop a policy that is appropriate for your firm and an approach for communicating expectations to your staff. You may want to include the policy in your employee handbook, post it on your intranet, and even have a formal meeting to educate your team about the guidelines and invite them to offer feedback.

Lead by example

As a manager, you can play a key role in setting the standard for social media use at your firm. Whether it’s blogging about accounting and finance issues on the corporate website, tweeting company news on Twitter, or interacting with potential recruits on Facebook, using Web 2.0 technologies in a variety of ways will underscore to your employees that management takes ‘getting social’ seriously.

Once you’ve started using social media throughout the firm, encourage employees to communicate how they’re benefitting from its use. And in the middle of the workday, if you notice an employee laughing at a YouTube video of a cat playing the piano, keep in mind that he or she is essentially taking the modern equivalent of a coffee break. Allowing your workers to be distracted occasionally by the fun aspects of social media will likely enhance their productivity – not hurt it.



Ashley Whipman is an Associate Director for Robert Half Management Resources, the UK’s premier provider of senior-level professionals on an interim basis. You can follow @Robert Half on Twitter.

Just How Good or Bad is the Accountancy Job Market?

There is conflicting media evidence concerning the state of the UK job market. On the one hand, there are job losses in the public sector, but there are also promising signs that many new jobs are being created.

In my experience, there is now much more movement in the job market. People who have stayed in their jobs during the downturn are now feeling more confident about making a career move. This game of ‘musical chairs’ is creating many new opportunities for well-qualified accountancy and finance professionals.
          
My professional clients are securing new jobs more quickly than other occupations, as organisations have focused on cutting costs, increasing efficiencies and re-structuring their borrowings. Government spending cuts, including the knock-on effects in the education and health sectors, should sharpen demand for capable accountants.

I have always maintained that the government statistics and the data produced by recruitment consultants is misleading; some jobs can be found within the ‘hidden job market’ and can be accessed through networking. Many jobs lost in the banking, financial services and fund management sectors have been quietly replaced over the past three years.

To access the best jobs and to give yourself more choice in the opportunities open to you, you should use a combination of job-hunting tactics. It is worth considering which organisations you would most like to work for and create a target list of these. You should of course look at specialist job sites like GAAPweb, but also keep an eye on your target employers. 

Use recruitment consultants wisely, by being clear on what you want and what you can offer. Although some employers are side-stepping recruitment consultants, many continue to use them for specialist hires because they relieve them of the burden of sifting large numbers of candidates and give them more reassurance than taking a direct hire.

The job market remains solid for those who are prepared to look a little harder.



Simon Broomer is a Senior Consultant at CareerBalance Ltd.

Why finance teams should break the mould of company complexity

In an increasingly complex world, the idea of simplifying business is an appealing one. Partner this with the publication of the Global Simplicity Index (GSI) recently – which has estimated that the world’s largest 200 companies lost $237 billion dollars collectively over the past year as a result of business complexity – and a desire for simplicity becomes a necessity.

The GSI is a joint work between Simon Collinson, Professor of International Business and Innovation at Warwick Business School, and the Simplicity Partnership, a management consultancy committed to simplifying the way that companies operate.
 
Together, they have calculated that ‘bad complexity’ within companies reduces profits (EBITDA) on average by 10.2%. However, the stage at which companies begin to destroy value as a result of their overcomplicated methods can be difficult to identify. Essentially, when a company grows it naturally develops processes which initially enable the company to flourish, but they inevitably reach a ‘tipping point’ whereby the benefits of additional complexity are outweighed by costs. Add this to pressing issues such as economic volatility, and the detrimental impact of complexity becomes ever more apparent.

Nevertheless, for large (and sometimes even small) companies who have become almost acclimatised to the complications of working life, it is difficult to identify what quantifies negative complexity. In their study, the Simplicity Partnership identified five main internal drivers of complexity: Products & Services, Strategy, People, Organisation and Processes. It is important, therefore, that companies review complexity more holistically than before. Although many companies have explored ways to reduce complexity from their processes, Simplicity Partnership argue it is unproductive to tackle complexity in this area alone.

So who should take responsibility for company complexity? The natural route would appear to be the finance department – not simply because monitoring company profitability is one of their key roles, but also as a result of the fact that the finance function is one of the few departments that has the luxury of working across the business. With attempting to increase company profits as the consistent bottom line for finance teams, it makes sense for them to also consider the detrimental effect that complexity may be having throughout the business. Indeed, when analysing companies, it was noted that some finance directors were taking up to four months out of every year in planning as a result of over-complicated scenario forecasting. It is actions such as these that truly demonstrate the pitfalls of excessive business complexity.

By tackling business complexity, the benefits could go beyond simply increasing profit margins. The founder of Simplicity Partnership, Melvin Jay, observed that “people don’t enjoy working in highly complex systems, they want to see the impact of their work – complexity is sapping morale”. Therefore, by identifying potential areas for simplification with the ultimate aim of increasing profits, it can easily evolve into equally beneficial changes for the company as a whole.

Ultimately, it is rational to suggest that in order to strive towards growth and increased profits, companies – finance teams in particular – need to look beyond the standard and assumed and assess the company as a whole. The myth that complexity signifies a highly advanced and functional business needs to be reconsidered. Instead, finance departments need to lead a culture of simplicity in order to see companies thrive.



Megan Evans is a Researcher for Trace Recruitment. Trace delivers senior finance recruitment briefs in industry, financial services and the third sector across London, the South East and Europe.

Reaching the Top is all in the Maths

Finance is fast becoming the route to the top – that’s the clear message from the findings of our annual FTSE 100 CEO Tracker. Over the past 4 years, we have been looking at the career progression of serving Chief Executive Officers (CEOs) within the FTSE 100 Index. This year, the findings reveal that nearly half (49 per cent) have financial backgrounds, compared to 31 per cent in 2008, indicating a stronger focus on sound financial management post-recession. 

This trend for financial leaders looks set to grow. Over the past year, six of the nine (67 per cent) appointed FTSE 100 CEOs have financial backgrounds, including Andrew Harrison of Whitbread and Nicandro Durant of British American Tobacco.

These findings suggest that as the economy continues to improve, there is increasing demand for leaders who can navigate what remains a challenging operating environment.

But let’s take a closer look. To begin with, the downturn gave the number crunchers the opportunity to shine. During this time, many finance leaders held key roles at the decision-making table, helping organisations remain as efficient, effective and profitable as possible. This allowed many finance professionals to gain prominence and demonstrate their leadership skills to the wider business.

However, the downturn might not be the only driver behind this trend. The growth of the finance leader, as with accountants, may also be attributed to an increasingly stricter regulatory environment. No company likes surprises, so a greater part of a CEO’s remit is taking ultimate responsibility for regulatory issues, which were not as stringent a few years ago – a role much more suited to someone with past experience of technical accounting and finance. Furthermore, it can be reassuring, especially to shareholders, to have a leader with a core finance background who understands and can address these issues.

It is not only their fiscal skills that have made finance professionals more crucial to a company’s performance, but also their strategic insight and the communication of that to internal and external stakeholders. Commercial skills, including an understanding of how the wider business operates as well as its strategy and vision, are becoming increasingly important to a finance professional, with the finance function emerging from the backrooms and into the boardrooms.

Increasingly, CEO figures are taking a more collaborative approach and are first turning to the finance department – among others – before making any important, strategic decisions. Previously under-valued, traditionally back-office functions are becoming more important to the day-to-day running of an organisation. As a result, finance professionals have a new-found power in the business world; no longer is their role perceived as a matter of facts and figures or as the ‘go-to’ when things have already gone wrong. More and more organisations are realising how financial know-how can be a means to an end, rather than an end in itself.

Undoubtedly, a new voice is emerging from the finance function, one that has new governance and strategic responsibilities. It is more important than ever to have finance professionals capable of shouting louder about the numbers and offering real, strategic solutions to problems. For those looking to climb the career ladder, never before has the finance professional had such opportunity to stand out from the crowd.



Phil Sheridan is the managing director for Robert Half International’s UK operations where he is responsible for leading the organisation’s strategy and direction across more than 20 office locations. He is a member of numerous professional and accounting associations where he participates on steering committees and groups.

Industry Event: The College Finance Directors' Annual Conference and Exhibition

Tuesday 28th and Wednesday 29th June 2011

The International Centre, Telford

The College Finance Directors' Conference provides a unique opportunity for finance professionals in the sector to catch up on all the important issues affecting the business of Colleges, including government funding, fees, higher education, loan finance, international student recruitment, cost reduction, benchmarking, pensions, tax and audit.

The draft programme for the event has now been launched.

For more information please visit: www.aoccreateevents.co.uk/financedirectors2011

Top reasons to attend:

• 36 hours to get up to date on all the big issues affecting Colleges
• Colleges face an average 2% reduction in income in 2011. Find out some ways to deal with this.
• Learn the latest on Skills Funding Agency and Young People's Learning Agency plans
• A choice of more than 20 seminars on everything from capital projects to higher education fees
• Financial leadership in Colleges has never been so important. Learn how financial leaders are dealing with challenges

"The last 12 months has seen profound change for Colleges. The 2011 College Finance Director's Conference is your chance to prepare yourself for what's next."
Julian Gravatt, Assistant Chief Executive/Director of Research and Development, Association of Colleges

For more information about the event visit:

www.aoccreateevents.co.uk/financedirectors2011

Email: events@aoccreate.co.uk
Tel: 020 7299 6980

Conference sponsors:


       

Is 2011 the Year of Eurozone Recovery?

Two years have passed since the world’s economic output reached its low-point. It was predicted by one of the UK’s largest banks at the height of the crunch that “it would not be until early 2011 that any sign of (economic) recovery would take place”. 

However, the former Prime Minister Gordon Brown commented this week: “I sense that in the first few months of 2011 we will have a major crisis in the Euro area”. With this growing pessimism, it appears that 2011 could still be a challenging year for the banking market.

The support of “Europe’s failing economies”  presents a potentially huge problem to the banking sector on several fronts. Eurozone banks have lent great financial support to ‘prop-up’ the financially weaker economies. This unsecured lending has once again greatly over-exposed many of the large European banks, at a time when there is a growing scramble to comply with stricter capital requirements.

We can only make a calculated guess, based on patterns that emerged from the global credit crunch, as to what effect the Eurozone crisis will have in recruitment terms. Considering the crunch was centred on the financial markets, it wasn’t by any stretch the financial sector that ultimately felt the hit the worst. The jobs lost in finance were around 8% – relatively low compared to jobs lost in construction and manufacturing, which were down 27% and 17% respectively.

Gordon Brown has recently supported this prediction by suggesting that a failing Eurozone would have a wider effect than just on the banks, predicting a long-term crisis could create “an unnecessary and avoidable period of low growth and high unemployment, and diminishing living standards”. 

There is also a question mark over the expansion plans of Eurozone banks, which now might be more reluctant to take any risks. The problem in particular is that “Europe has lost ground to both the US and Asia”. Therefore the risk, with stricter Visa requirements coming into force, is that Europe will no longer be the destination of choice for highly-skilled migrants, with the continent losing candidates to the US and Asia, whose economies, for now, look more stable.

The Nationalised Irish Banks have been the subject of immediate focus the last month, although from looking at the likes of RBS and Lloyds it cannot be said that nationalisation has caused a negative impact on the recruitment needs of some of the largest Nationalised European banks. Indeed, it may be the case that any nationalised Eurozone banks are forced to increase recruitment amid restructuring plans. However, with Lord Turner commenting that the FSA may claw back the pay of failed banks bosses, it creates a danger that there may be a reluctance to take roles at the highest level of financial organisations, or indeed create a culture of over cautious decision makers that weaken the long-term competitiveness of companies in fear of taking a risk too far.

For 2011 to remain the year of recovery ultimately relies on a speedy resolution of the Eurozone crisis.



Consultant Sam Price currently works on the Banking and Capital Markets Contract Team at Marks Sattin. He places both part qualified and qualified accountants in contract positions across financial services, working with major and mid-tier investment and retail banks.