The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian accountants specialising in internal theft/fraud investigations have seen a general 10-15 per cent increase in such assignments since the recession began, Tribune Business was told yesterday.

Kendrick Christie, partner and a Certified Fraud Examiner (CFE) at Grant Thornton (Bahama), said he believed Bahamian companies often taking longer than the global 18-month average to detect cases of employee fraud and theft.

Pointing out that companies were becoming more proactive and “fighting back” against such crimes, Mr Christie said he and his CFE colleagues anticipated that increased ‘white collar crime’ trends would “continue for a lot longer” given the Bahamas’ economic situation.

Adding that the Bahamas was in line with Association of Certified Fraud Examiners (ACFE) findings that businesses, on average, suffered internal theft/fraud losses equivalent to 5 per cent of annual revenues, Mr Christie said that in ‘low margin’ sectors these sums could be the difference between profit and loss.

“With my CFE colleagues, we are seeing an uptick of 10-15 per cent compared to pre-recession levels, depending on the situation,” Mr Christie told Tribune Business of the increase in internal theft-related assignments.

“But it started before the recession. Companies are more cognisant. I saw companies saying: ‘We’re tired of this, let’s begin investigating this thing. We’re going to prosecute this thing and not sweep it under the rug’.”

However, Mr Christie acknowledged that many Bahamian companies were reluctant to take offending employees to court, fearing their reputation would be permanently damaged if details became public.

Instead, they often choose to just dismiss staff members involved, sometimes with agreements that missing funds are returned. The end result is that dishonest employees often bounce from Bahamian employer to employer, usually getting up to the same tricks.

The Grant Thornton partner, though, said Bahamian businesses could turn such situations to their advantage, explaining: “You can enhance your reputation by making it known you had the situation under control, and were able to detect and prevent this from happening.”

Mr Christie said Royal Bahamas Police Force (RBPF) officers had openly told him they wanted “more businesses to prosecute. They investigate these crimes, and then the company drops it”.

Too often, employers invested in anti-fraud and theft systems after the fact, Mr Christie said, although many companies were now attempting to be proactive developing manuals and policies on the subject, and holding training programmes for staff.

“The typical fraud, on average, takes about 18 months to be detected,” the Grant Thornton partner told Tribune Business.

“That would be right up there in the Bahamas. I would think the detection time here is greater than 18 months. Usually, it could be someone very entrenched in the business and not suspected.

“We see companies fighting back...... We’re seeing companies approach us to do audits on a regular basis, which we’ve not seen before. That shows there’s some recognition of the problem.

“Our firm is being approached for more fraud investigations and forensic accounting. There’s a lot of people out of work, desperate people, and sometimes people at work are connected to them. They have a need to fund their families, or have low integrity. We anticipate this trend will continue for a lot longer.”

While the Bahamas was in line with the average 5 per cent of revenues lost to internal theft/fraud finding by the ACFE, Mr Christie said the fact more than 90 per cent of Bahamian businesses were small or medium-sized meant the impact was disproportionately greater here than when compared to firms in the US.

He used the example of a business with an annual turnover of $1 million. Based on the 5 per cent loss ratio, that represented a $50,000 loss for firms that often had “low margins and a narrow bottom line. That could be the difference between profit and loss. Businesses need to keep themselves afloat”.

Elsewhere, Mr Christie told Tribune Business that Grant Thornton (Bahamas)was encouraging large companies that did not have internal audit functions, but should do, to implement such departments.

And an emerging fraud trend involved online bank accounts, he added.