Under ever closer scrutiny - FT.com Last month, Christopher Grierson, a prominent London lawyer, was sentenced to three years in prison. His crime: falsely claiming almost £1.3m of travel expenses from his former employer, law firm Hogan Lowells. Mr Grierson's case was noteworthy because of his status - the firm had once described him as a "star" and he had worked on a number of well-known cases, including representing the trustee responsible for liquidating the assets of Bernard Madoff - as well as his salary of £830,000, which would suggest he did not need the extra money. IN Management But Mr Grierson is not the only high-profile executive to make the headlines for the wrong reasons. In May, Jessica Harper, the former head of digital banking fraud and security for Lloyds Banking Group, appeared in court for allegedly claiming nearly £2.5m in fake invoices. Cifas, the UK fraud prevention service, says it has recorded an increase of 14.5 per cent increase in frauds committed by employees against their employers. BDO Stoy Hayward, the accountancy firm, reported in its Fraudtrack measure that UK fraud had risen by 50 per cent in terms of value in 2011. What is underpinning this trend? One factor is the downturn, which has made it much harder to hide any untoward activity. "Many of the frauds we're seeing now might have occurred during the boom years and then come to light when companies start to look at budgets more closely," says Simon Bevan, national head of fraud and financial crime at BDO. Meanwhile, some surveys suggest there has been a shift in attitude towards fraud. Ernst & Young's 2012 global fraud survey found that 15 per cent of the corporate professionals it interviewed in 43 countries believed a downturn would justify making a cash payment in order to secure business - up from 9 per cent in 2010. Alex Plavsic, a partner and head of forensic at KPMG, the professional services firm, says that the motivation differs depending on the individual's level within the corporate hierarchy. "For employees and management, there are slightly different equations at work," he says. Often if employees get into financial stress, the only place they can look . . . is the business they work for. The classic fraud here is expenses. For management, it is more often about achieving business results. They might provide inaccurate information to keep banks lending. Tips on preventing internal fraud ● Make sure you do due diligenceon the people you recruit at every level of the organisation. An apparently stunning CV may not be all it seems. ● Senior management must lead by example and show restraint with pay. A them-and-us workplace environment makes fraud far easier for people to justify to themselves. ● Create a culture where these things are discussed openly. If something does go wrong, talk about it. Ensure staff understand what fraud is and why it needs to be reported. This also means making it easy for whistleblowers to speak up, and ensuring they are protected. ● Clamp down on minor transgressions and ensure that adequate controls are in place. It sends out a signal that the business is alert to fraud. ● Fraud is often highly sector- specific. Be alert to the opportunities in your industry. ● Don't let them get away with it. If all wrongdoers get is a slap on the wrist, it hardly makes for a strong disincentive. Mr Bevan also sees greed as a motivator. "I deal mainly with fraud that involves senior management - board-level people - and it's largely for personal gain," he says. This was the case for Patricia Smith, a former employee at an Acura car dealership in Pittsburgh. In January, she pleaded guilty to wire fraud and admitted to embezzling $10.2m from the business. She spent the money on private jets, holidays, lavish entertainment and even a VIP trip to the Vatican that included a papal mass. Commenting on her motivation, David J. Hickton, a US lawyer involved with the case, said: "The only explanation appears to be simple greed." Mr Plavsic has seen similarly extraordinary claims. We investigated one guy who was putting through a £5,000 flight every month. He was a sales guy and everyone just assumed it was a monthly flight. Just as fraud differs with level and motivation, it also differs with industry. "In retail you might see a lot of procurement fraud," says Mr Bevan. This could, for example, involve a corrupt relationship between a supplier and a buyer. In a sector such as retail banking, the opportunities are different. "In one case last year, bank staff had been approached by a criminal gang," says Cifas. They were basically signing off loan and credit applications they knew to be false. They were getting kickbacks from the gang for this, but it was also helping them to beat targets. What can businesses do to curtail the activities of unscrupulous staff and managers? Mr Bevan says that a lot of the fraud that occurs at a higher level is down to a lack of due diligence when recruiting senior people. "A lot of fraud prevention is just good recruitment," he says. If someone has a good track record, you tend not to look at them too closely. There's almost a Victorian mindset in the business world where people think staff will steal from them but management are beyond reproach. Mr Bevan adds that if you use recruiters, it can sometimes be the case that they are more interested in placing people than vetting them properly. Some of the problem can also be down to poor leadership within the organisation, particularly when management does not live up to the standards it sets for the rest of the company. "If management lives the values of a company themselves, we see tremendous upsides in behaviour," says David Stulb, global leader of fraud investigation and dispute services at Ernst & Young. Philippa Forster Back, director of the Institute of Business Ethics, echoes this view: "If people see senior managers enriching themselves while everyone else tightens their belt, they think: "Well why shouldn't I?" " It also helps if companies are willing to acknowledge when fraud happens. "It needs to be spoken about and you need to ensure people know what bad looks like," says Mr Plasvic. You need to ensure supervision and controls overlap. Companies should also make it easy for individuals to blow the whistle if they suspect wrongdoing is taking place. Indeed, Ms Foster Back advises that companies "should write these policies from the point of view of the whistleblower." Perception matters. In some cases, there has been a perception that those most involved in wrongdoing receive little more than a slap on the wrist, not least because the companies for whom they worked are worried about the impact on their corporate reputations. But Ms Foster Back believes this is changing. "In the Twitter world, it's far harder to keep a lid on these things and companies are taking a more robust stance," she says. Even so, says Mr Bevan, the satisfaction of a Hollywood-style courtroom ending is unlikely. Sophisticated frauds very rarely go through the criminal courts. But if there's a lot of money involved, there are likely to be assets left and we'll pursue them . . . They might well lose their house.