EMPLOYEE SCREENING HANDBOOK - THE IFACTS GUIDE TO DEVELOPING AN EFFECTIVE EMPLOYEE SCREENING POLICY FOR YOUR ORGANISATION
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Employee Screening Handbook The iFacts Guide to Developing an Effective Employee Screening Policy for your Organisation
ABOUT THE AUTHOR
Jenny Reid
CEO of iFacts CEO
Jenny Reid, the driving force behind iFacts, is a woman who makes things
happen in the security environment. Where others see challenges, she
envisions solutions. She has become an outspoken advocate of change,
integrity and innovation. Her solid experience gets her respect, while her
fearless attitude is admired by her peers, the media—and her clients.
Jenny is a sought-after speaker and conference facilitator, both in South
Africa and abroad, where her experience, insights and sharp analysis of
the sector is valued by organisers and audiences alike. Her bold attitude
and tireless energy have made her stand out in the industry where she
has become both a mentor and role model to other women.
She started her career in the security industry in 1995 when she joined
Griffiths and Associates. She soon moved up the ranks to operations
manager and later managing director, changing the name to Griffiths Reid.
Since then, Jenny has proven herself as a trailblazer—bringing insight,
intelligence and innovation to every task she tackles.
She started the progression of the security sector from the inside where
her integrity and talent was recognised when she became the first
woman president of the Security Association of South Africa
(SASA) in 40 years.
Early on in her career, Jenny developed a passion for
employee screening. When she bought the iFacts brand in
2001, she saw an opportunity to help her clients remove
risks and develop progressive solutions to employee
screening.
From this, Jenny took her idea a step further and
developed a holistic employee enhancement programme,
aimed at helping business owners create an honest, loyal,
productive and happy workforce.
Outside of business, Jenny has developed a passion
for walking in support of children’s charities, eventually
heading up her own initiative, Adventures for Love. Jenny
lives in Johannesburg with her husband, Neil. She has
two sons, Brad and Craig.
1
ABOUT IFACTS
Want to add true value to your organisation?
When it comes to Background Checks, Screening and Vetting, your
organisation needs a proactive, stringent and comprehensive approach.
iFacts are the experts in helping you to identify and manage your people risk.
iFacts provides businesses with the ability to remove human resources risks.
Established in 2001, iFacts recognises that all too often, it is the people
working for an organisation that present the greatest threat to security. iFacts
has seized the opportunity to help clients remove people risks and develop
progressive solutions to employee screening and fraud prevention.
iFacts provides a comprehensive bouquet of services to keep organisations
and their employees safe, secure and honest. A pioneer in its field, iFacts
has perfected the art of protecting company assets, and created dishonesty
detection solutions and verification capabilities that effectively deal with new
threats as they arise.
2
Introduction
INTRODUCTION TO
EMPLOYEE SCREENING
Hiring new employees is a delicate balance between finding someone who’s the
right fit for the position as well as the right fit for the company itself.
An effective Employee Screening Policy can be the key differentiator,
where HR hires an employee game changer, or someone who
negatively impacts the morale and productivity of those around
them. The value of employee screening is focused around its ability
to provide companies and hiring managers with the tools necessary
to place the missing puzzle pieces for the job at hand. Not only does
employee screening ensure you find the right candidate, it also
provides long-term financial savings.
Numerous companies stall on introducing effective employee screening programmes as they
consider them to be an additional and unnecessary cost. The value of employee screening may seem
unquantifiable. However, consider the advantages of bringing qualified, experienced, motivated, and
productive employees on board versus the cost and hassle of a less suitable employee who may not even
stay with the company, or worse, adversely impact on the organisation.
To get the best value possible, employee screening should be implemented as a proactive policy that
forms part and parcel of the recruitment process from the outset.
It should include a number of core checks, balances and standards. A thorough background check not
only demonstrates a prospective employee’s affinity for the job at hand, but also reveals any potential
disciplinary issues at previous companies such as theft or fraud.
Employee turnover is another area where screening can help ensure employee commitment and longevity.
A high rate of employee turnover can have hugely negative consequences as the cost of training and loss
of productivity begin to add up. Background checks allow the employer to assess a candidate’s work
history and see whether their track record in previous positions demonstrates commitment or a potential
rolling stone.
Making more informed hiring decisions based on proactive and continuous employee screening eliminates
the unnecessary hassle of high staff turnover and unpleasant disciplinary issues and instead opens the
door to competent, effective and dedicated candidates that will take your organisation to greater heights.
3
CONTENTS
1 Chapter One: Investigating the Iceberg
2 Chapter Two: Reviewing The Landscape
3 Chapter Three: The Rise of Global Corporate Fraud
4 Chapter Four: Profiling the Perpetrators
5 Chapter Five: Developing an Employee Screening Policy
6 Chapter Six: Pre-Employment Checks to be conducted
7 Chapter Seven: Developing an Employee Screening Policy
8 Chapter Eight: Taking Action
4
CHAPTER ONE
Investigating the Iceberg:
The importance of Employee Screening as Best Practice
5
The iFacts Employee Screening HANDBOOK Chapter One
Investigating the Iceberg: The importance of
Employee Screening as Best Practice
In 1912, the doomed Titanic hit its fatal iceberg because it didn’t realise
the danger ahead before it was too late. Deceptively, most of this floating
mountain of ice was below the waterline; some 85% or more of a typical
iceberg lies unseen.
In much the same way, what we know of our employees in 2016 is often
just a fraction of the real picture. Just as you don’t want your company to
sink, you need to go deeper and further to gain clarity in security detailing Do your
or analysis. You may only be looking at an eighth of the picture. Is that
really what you want to base the future of your organisation’s growth and employees clearly
development on? understand the
purpose and
For the past 20 years, working on ways to keep clients and their valuable
employees safely on course, in secure and thriving working environments, value of employee
we’ve learned the importance of Background Checks and Employee screening? Do
Screening—investigating the iceberg, as it were. For us at iFacts, it’s
part of making the workplace safer, and producing teams that are open, they understand
principled and productive. that it protects
them, not just the
The truth is that more companies are checking employment chronologies,
educational certification, driving licences and credit histories. In South company?
Africa, where fraud and collusion are rife, it is especially important.
However, what no one realises is that if this process is done in a random
or unethical manner it can be destructive to a company and may lead
to serious legal consequences. The best screening processes are
well-formulated, well-communicated and transparent; they are
understood and accepted as a standard part of company procedures.
Communication in formulating any new employee
policy is important — to understand the strengths,
risks and consequences of a policy. It also protects
the company itself in becoming more compliant
and accountable.
6
The iFacts Employee Screening HANDBOOK Chapter One
How big is the iceberg?
The formulation of a screening policy starts when security professionals
meet with Human Resources to discuss the needs of the company,
identify areas of vulnerability, see what resources are available and agree
on the required outcomes.
• Who should be checked?
• What type of checks should be carried out?
• What criteria will be used in the process?
• Does it infringe on personal or legal rights?
Recent
Sadly, not all employee screening checks are as exhaustive or reliable surveys in the
as clients may think. It is critical to work with a group of specialists who US showed
understand what checks are relevant to your company’s employees or
vendors. On this note, when it comes to screening, don’t ignore partners vendor employees
in your company, temp or contract workers or consultants. are 92% more
likely to have a
Recent surveys in the US showed vendor employees are 92% more
likely to have a criminal record than permanent employees, according criminal record
to security commentator Ron Lashier in a media report. This indirect than permanent
workforce often slips through the security loophole.
employees
Once you have the above information, a thorough and compliant
employee screening policy can then be designed to suit a company’s
needs and values. In other words, get a robust picture of the iceberg,
both above and below the waterline. Remember: a resilient company is
one that can react to a threat timeously and effectively.
In summary – Employee screening protects
your organisation and its employees from
outside threats; then tries to identify the risks
that may already be inside.
7
The iFacts Employee Screening HANDBOOK Chapter One
Protecting the ship
Once you have the buy-in from staff, vendors and other stakeholders
in your compliance measures, you have a stronger and more integrated
security strategy to work from. Think of it as a sense of security in
your security.
Sporadic
From the CEO’s corner office to the cleaner who comes in every morning
to empty the dustbins, a standard policy will safeguard everything on the
checks offer weak
ship: staff, assets, intellectual property, databases, and other information. protection in
terms of employee
Keeping on course screening. To stay
on course, so to
Here’s a warning. Sporadic checks offer weak protection in terms of speak, you need
employee screening. To stay on course, so to speak, you need complete,
accurate and consistent information. A comprehensive and detailed plan complete, accurate
is what keeps employees and employers safe. A thorough screening and consistent
should be carried out by professionals, experienced and trained in
investigations, who know where to place their telescopes.
information. A
comprehensive
Security checks must apply to more than just your existing permanent and detailed
employees. It must extend to new people coming in, extended
stakeholders and vendors and, most importantly, it must be an ongoing
plan is what
process. A false sense of security and complacency can be deadly— keeps employees
ask the captain of the ill-fated Titanic. and employers
safe. A thorough
screening should
be carried out by
professionals,
experienced
From the CEO’s corner office to the and trained in
cleaner who comes in every morning to investigations,
empty the dustbins, a standard policy will who know where
safeguard everything on the ship: staff, to place their
assets, intellectual property, databases, telescopes.
and other information.
8
CHAPTER TWO
Reviewing The Landscape
9The iFacts Employee Screening HANDBOOK Chapter TWO
Reviewing the Landscape
The 2015 announcement by the Passenger Rail Agency South Africa
(Prasa), that it had suspended chief engineer, Daniel Mtimkulu over what
it said was the fact that “he lacked the necessary qualifications” has once
again shown how widespread the problem of qualification fraud in South
Africa is.
This scandal came to light after Prasa had faced questions over the
The 2015
purchase of new diesel locomotives from Spain, and over a R51 billion Prasa scandal
tender for the purchase of 600 trains for its fleet renewal programme. The is but a drop
agency had reportedly ignored warnings from engineers that the 13 Afro
4000 locomotives, imported from Spain for R600 million, were too high in the ocean.
for local railways and could damage overhead cables. Just another
embarrassment
The 2015 Prasa scandal is but a drop in the ocean. Just another
embarrassment for one of the local parastatals that have been bedevilled for one of the
with qualification scandals over the past two to three years. local parastatals
that have been
Mtimkulu claiming a falsified Ph.D. degree from a German university,
a tenure at Wits University that never happened and a non-existent bedevilled with
registration with the engineering profession’s statutory body – all once qualification
again go to show how vitally important it is for employers to conduct pre-
employment screening.
scandals over
the past two to
So if the problem is so prevalent at a state level, it follows that the three years.
same type of problem may be cropping up in the private sector as well.
Back in February 2014 PricewaterhouseCoopers released its annual
Global Economic Crime Survey. It exposed the shocking prevalence of
economic crime, stating that companies in South Africa are hit by more
fraud, bribery and corruption than their global counterparts. While the
next Global Economic Crime Survey is due for release soon, ENSafrica
believes that South Africa’s global reputation in terms of economic crimes,
is taking serious strain.
Companies in South Africa are hit by
more fraud, bribery and corruption
than their global counterparts.
10The iFacts Employee Screening HANDBOOK Chapter TWO
Is South Africa out of control?
South Africa better take note that business experts in the US and the UK
are starting to see Zimbabwe as a more attractive investment destination
than South Africa (SA). The reason being South Africa’s ever more
prevalent image of a corrupt state. This is the view of forensics specialist,
Dave Loxton of the legal firm, ENSafrica, as published in a FIN24 report
during September 2015.
“Corporate SA must do more about the country’s image of bribery and
corruption,” said Loxton at the launch of the ENSafrica 2015 anti-bribery
and corruption survey on Tuesday. About 88 organisations in Africa,
including Mauritius, were surveyed.
Steven Powell, co-head of forensics at ENSafrica said there are
He expressed
10 things the US Department of Justice usually expects to see in a concern about
company’s anti-bribery and corruption programme, including:
corruption
• Commitment to compliance at the highest level
• Written and widely disseminated compliance policies – also
becoming
translated into local languages where appropriate entrenched in
• Periodic reviews and updates municipalities and
• Independence and adequate funding
in the government,
• Training and guidance
• Internal reporting mechanisms
adding that only
• Investigations, including adequate resources and effective about 10% of
processes as integrity is very important corporates in
• Enforcement of policies and disciplinary measures for non- South Africa
compliance
• Paying attention to third party relationships – examine these closely are probably
and sensitise third parties to the importance of compliance and anti-corruption
show a willingness to terminate those agents and contractors who
fail to comply
compliant.
• Monitoring and testing
The UK Government looks at:
• Procedures
• Top level commitment
• Due diligence
• Communication and training
• Monitoring and reviewing
Powell also said the general corruption levels in SA could very well be
“out of control and that almost anything can be acquired at a price”.
He expressed concern about corruption becoming entrenched in
municipalities and in the government, adding that only about 10% of
corporates in South Africa are probably anti-corruption compliant.
11The iFacts Employee Screening HANDBOOK Chapter TWO
SA’s Biggest Corruption Scandals
According to a report released by Trade Union Solidarity in September
2015, the top 10 corruption scandals seen in South Africa over recent
years have cost the taxpayer more than R246 million, that’s even more
than the President’s State home, Nkandla.
“According to the Institute of Internal Auditors of South Africa, R700
million was lost due to corruption during the two decades following the
dawn of democracy,” Solidarity explained in its report. FIN24 reported
on this in September 2015 and according to Dr Eugene Brink, senior It is
researcher at the Solidarity Research Institute, the findings in the report, impossible to
although shocking, are merely a drop in the ocean.
quantify the
“It is impossible to quantify the actual extent of corruption in South Africa actual extent
as much of the corruption takes place unnoticed and unpunished. of corruption
in South Africa
“Furthermore, there are even more incidents of corruption not mentioned
in this report that exceed Nkandla,” said Brink. “Therefore, the findings
as much of the
in the report are not all-encompassing and are merely an indication that corruption takes
corruption is undeniably one of the biggest crises in our country.”
place unnoticed
Beyond Nkandla, the other top nine scandals are…
and unpunished.
Therefore, the
1. Local government findings in the
In 2013, Corruption Watch declared local government to be the most report are not
corrupt institution in the country. Corruption Watch spokesperson Bongi
Mlangeni said: “We receive too many reports about maladministration, all-encompassing
mismanagement of public funds and abuse of resources by officials at and are merely
local government levels. It seems there is a need to rethink how systems
of accountability can be applied at these levels.”
an indication
that corruption is
2. Tenderpreneurship undeniably one of
Irregular expenditure of R2.429 billion was incurred by 17 auditees in the the biggest crises
Free State during 2013/14. It was mainly caused by non-compliance with
supply chain management requirements, the report revealed. “During in our country.
2013/14, nearly 60% of the auditees had material findings concerning
uncompetitive and unfair procurement processes and these findings were
also the main cause of the irregular expenditure of R11.351 billion.”
3. Tshwane prepaid meters
What seemed like a wise measure aimed at combatting the non-payment
of electricity in the City of Tshwane, was exposed as an exceedingly
expensive and corrupt imbroglio, said Solidarity. “Tshwane had paid
PEU a gargantuan R830 million between October 2013 and May 2015
to install 800,000 meters and manage the project for eight years. At the
time of cancellation, only 12 930 meters had been installed while PEU
12The iFacts Employee Screening HANDBOOK Chapter TWO
SA’s Biggest Corruption Scandals continued
was required to install more than 435,000 during the first two years – a target it was
highly unlikely to achieve.”
4. The SAPS
Cash-flush criminals bribe police officers to thwart cases against them while poor
people are denied justice as they simply do not have the means to pay police
officers to do the work they are supposed to, Solidarity said.
5. The Metro police
In January 2015, three Tshwane metro cops were arrested for bribery, while the
Tshwane Metro Police Department sacked 67 members of its anti-corruption unit in
late 2011 and officially disbanded the unit in 2012, the report showed. “A worrying
184 out of 2,600 officers at the Johannesburg Metro Police Department (JMPD)
were probed for corruption between 2009 and 2011.”
6. Prasa
Reeling from recent revelations on a corrupt tender that saw R620 million being
wasted on unsuitable locomotives, the beleaguered Passenger Rail Agency of
South Africa (Prasa) has been coming off its rails, Solidarity said. “The public
protector found that (ex CEO Lucky) Montana was responsible for large-scale
maladministration, abuse of power and wasteful expenditure during his tenure at
Prasa.”
7. False qualifications
Ever since the ignominious revelations that ANC spokesperson Carl Niehaus lied
about his qualifications, many government bigwigs have been outed as qualification
falsifiers, Solidarity said. “No scandal of this kind was bigger than the one
surrounding former Arts and Culture Minister and struggle stalwart Pallo Jordan.
It was established in 2014 that Jordan lied about obtaining his PhD and has no
tertiary qualifications whatsoever.”
8. Home Affairs
A 2015 report showed that the Marabastad refugee office in Pretoria is a hotbed
of corruption and bribery and one of the most corrupt Home Affairs offices in the
country, Solidarity said. “A 2012 report analysing the complaints lodged with the
National Anti-Corruption hotline stated that corruption at the Department of Home
Affairs took fourth place, with 781 cases reported since the hotline’s inception in
2004.”
9. The cabinet and parliament
In 2006, 14 ANC LPs were convicted and fined after pleading guilty to theft and
fraud charges due to the abuse of parliamentary travel vouchers in a case known as
Travelgate, Solidarity said. “Prominent ANC LPs such as Nathi Mthethwa, Lindiwe
13The iFacts Employee Screening HANDBOOK Chapter TWO
SA’s Biggest Corruption Scandals continued
Sisulu, Nosiviwe Mapisa-Nqakula, Beaty Dlulane, Mnyamezeli Booi,
Lindiwe Sisulu, Ruth Bengu and Humphrey Mmemezi as well as EFF
LPs such as Dali Mpofu and Julius Malema have all been implicated in
irregular and corrupt practices.” Solidarity said it consulted various media
sources and indexes to analyse 10 case studies.
14CHAPTER THREE
The Rise of Global Corporate Fraud
15The iFacts Employee Screening HANDBOOK Chapter THREE
The Rise of Global Corporate Fraud
According to the Kroll Global Fraud Report 75% of companies around
the world experienced a major fraud incident in the past year, 81% of
companies affected by fraud reported insider perpetrators and that
whistleblowers were responsible for exposing 41% of these fraud
incidents.
The report
Three quarters of companies (75%) have fallen victim to a fraud incident in
revealed that
the past year, a rise of 14 percentage points in just three years, according among companies
to the Kroll Global Fraud Report 2015-2016. that experienced
These findings reveal that the biggest fraud threat to companies
information/
comes from within. Of those companies where fraud occurred and the data loss, theft
perpetrator was identified, four in five (81%) suffered at the hands of at or attack over
least one insider, up from 72% in the previous survey.
the past 12
More than one in three victims (36%) experienced fraud at the hands of a months, the most
member of their own senior or middle management, 45% at the hands of common cause
a junior employee, and for 23% the fraud resulted from the conduct of an
agent or intermediary. was dishonest
employees
The report also revealed that among companies that experienced at 45% and
information/data loss, theft or attack over the past 12 months, the
most common cause was dishonest employees at 45%, with dishonest dishonest vendors
vendors and suppliers involved in 29%. By comparison, only a small and suppliers,
minority involved an attack by an external hacker on the company itself
(2%) or on a vendor/supplier (7%).
involved in 29%.
By comparison,
One in three (33%) executives cited high staff turnover as the main driver only a small
of increased exposure to fraud. This is more than twice as many who
named the next highest driver of vulnerability to fraud, greater outsourcing
minority involved
(16%). an attack by an
external hacker
“Much media attention is focused on external threats to companies,
highlighted by high profile cyber-attacks, but the evidence revealed in our
on the company
report and our day-to-day experience tells a different story,” says Tommy itself (2%) or on a
Helsby, Chairman, Kroll. “The respondents in this survey indicate the vendor / supplier
greatest single cause of fraud in their companies is their own employees.
It is not enough for companies to protect themselves from outside threats (7%).
– both external and internal vulnerabilities need to be addressed.”
Overall, 69% of businesses suffered a financial loss as a result of fraud,
up from 64% in the previous survey. Theft of physical assets was the
most common fraud experienced (22%), followed by vendor, supplier or
procurement fraud (17%) and information theft (15%).
16The iFacts Employee Screening HANDBOOK Chapter THREE
The Rise of Global Corporate Fraud CONTINUED
Percentage of Companies Affected by Different Types of Fraud
% of companies affected by
Type of Fraud
this in the past 12 months
Theft of physical assets 22%
Vendor, supplier or procurement fraud 17%
In the past
Information theft 15% year, 72% of
companies were
Management conflict of interest 12% dissuaded from
operating in a
Regulatory or compliance breach 12%
particular country
Corruption and bribery 11% or region because
of the heightened
Internal financial fraud 9%
exposure it would
Misappropriation of company funds 7% bring to fraud.
Latin America
Money laundering 4% (cited by 27% of
IP theft 4%
all respondents)
was the region
Market collusion 2% which saw most
businesses turn
away, but the
other perennial
Increase in Vulnerability to Fraud
region of concern,
Four in five Kroll Survey respondents (80%) believe their organisations Africa, was not far
have become more vulnerable to fraud in the past year. Executives behind (22%).
expressed particular concern around areas such as cyber risks, with
more than half of respondents (51%) believing they are highly or
moderately vulnerable to information theft. This increased awareness
level has led to growth in the number of companies proactively
looking after their information security requirements, with two-thirds
(67%) reporting that they regularly conduct data and IT infrastructure
assessments. A majority of respondents report they have an up-to-date
information security incident response plan (60%) and have tested it in
the past six months (59%).
17The iFacts Employee Screening HANDBOOK Chapter THREE
The Globalisation of Businesses Increases
Fraud Risk
In a global marketplace where many international businesses have
thousands of companies in their supply chain, risks become more difficult
to identify and keep under control. Executives say their companies are
particularly at risk of threats such as vendor, supplier or procurement
fraud, with half of respondents (49%) feeling highly or moderately
vulnerable to this type of incident.
Some 40% of the Kroll Survey respondents felt highly or moderately
vulnerable to corruption and bribery, another type of fraud that has the
propensity to increase as companies expand geographically into new
territories.
In the past year, 72% of companies were dissuaded from operating in a
particular country or region because of the heightened exposure it would
bring to fraud. Latin America (cited by 27% of all respondents) was the
In a global
region which saw most businesses turn away, but the other perennial marketplace
region of concern, Africa, was not far behind (22%). where many
international
Whistleblowers: Key Defence Against businesses
Insider Fraud
have thousands
In the past year, a whistleblower was at least partially responsible for
of companies
exposing 41% of cases of fraud that were uncovered. This is well ahead in their supply
of the next two most frequent sources of discovery, external audits (31%) chain, risks
or internal audits (25%).
become more
The findings show that anti-fraud efforts can have an impact on the threat difficult to
from within. Of those firms hit by fraud where the perpetrator was known, identify and
only 20% of those with management controls in place suffered at the
hands of a senior or middle manager, compared to 31% of firms without keep under
such controls. control
In an environment where insiders are the source of the problem, other
employees who observe or become aware of what fraudsters are doing
are the company’s strongest defence.
“What our report and our day-to-day experience tell us is that despite
companies making greater and more sophisticated efforts to combat
fraud, it remains a serious business threat that cannot be completely
eliminated,” says Helsby. “Furthermore, the adverse impacts of such
incidents cannot be underestimated. Fraud is not going away and
continues to be on the rise, but the well prepared business can do much
to stay one step ahead and be positioned to eliminate or mitigate it.”
18Global Employee Screening
Statistics
More than
35 of applications
OF JOB CONTAIN FALSIFIED
APPLICATIONS information about
contain inaccurate
information work
history
40 35
of applications feature a of statements about
falsified professional
qualifcations
qualification
are untrue
*Source: HireRight, the global due diligence company. February 2015. 19You won t believe
how many people lie on their CVs
2 500
HIRING MANAGERS
found that
of applicants
lie oN their applications.
of hiring managers of hiring managers
FIND PEOPLE LIE find people lie about
about their their CAPABILITIES
of
responsibilities
*Source: CareerBuilder, 2015 Employee Screening Survey 20CHAPTER FOUR
Profiling the Perpetrators
21The iFacts Employee Screening HANDBOOK Chapter four
Profiling the Perpetrators
So now that we have an idea of the extent of insider fraud, how does
one go about spotting the typical insider fraudster and keep them out
of the organisation? Are there traits, backgrounds or personalities that
are shared by people who commit fraud and embezzlement? Principal
Criminologist at the Australian Institute of Criminology, Dr Russell Smith,
believes this is far more complicated than most people think.
“Fraud involves ‘dishonestly obtaining a benefit, or causing a loss, by
deception or other means’ and can be perpetrated by public servants or
employees, who may abuse their privileges for personal gain,” says Dr
Smith.
Fraud
“The impact of fraud is substantial, not only in terms of financial loss but
involves
by creating a negative and counter-productive atmosphere within affected ‘dishonestly
workplaces. Fraud can destroy working relationships, reduce productivity
and lead to loss of staff with immeasurable direct and indirect harms
obtaining a
being suffered in the public sector, private organisations and even the benefit, or
community at large.” causing a loss,
Dr Smith asserts that identifying people who are planning to, or in the
by deception or
process of committing fraud is the first step in minimising the extent of other means’
these harms—the longer acts of dishonesty continue, the greater the and can be
financial and other harm that will be caused.
perpetrated by
But what makes someone act dishonestly, and how can we identify such public servants
people before they carry out their planned conduct? or employees,
who may abuse
There are certain factors (red flags) that make people vulnerable to
acting dishonestly in the workplace. The desire to predict who will act their privileges
dishonestly or even criminally remains an ever-present issue as we try to for personal
identify and change the behaviour of those at risk of acting dishonestly
against others. gain
The characteristics of convicted fraudsters
Prior research has found that those convicted of fraud offences have
similar personal and professional backgrounds to each other, says Dr
Smith. Of course, this evidence relates only to those whose crimes
have been detected and investigated officially. Different profiles might be
present for those who manage to evade detection.
In Australia, an annual census of Commonwealth entities is undertaken
to assess the extent of fraud experienced by these companies.
22The iFacts Employee Screening HANDBOOK Chapter four
The characteristics of convicted fraudsters continued
Respondents are asked to report details of those who were alleged to
have committed the most costly fraud incident in the preceding year.
• 6% of the most costly internal fraud allegations were against
5
males.
• 76% were full-time employees, and 49% had been employed with
the entity for four years or more.
• In terms of education, 61% had tertiary-level qualifications
• The mean duration of offending was 16 months, with the longest
period of offending lasting seven years.
Serious
Global auditing firm, KPMG undertakes a survey of fraud, bribery and
corruption amongst Australian and New Zealand organisations every two
fraud offenders
years. The latest survey had responses from 281 organisations who were tend to
asked to report fraud incidents over the period of a year. have similar
characteristics
• The profile of major fraud offenders indicated that 75% were male
• 31% earning more than $100,000 annually. and are
• Almost three-quarters of offenders were internal staff members usually trusted
(75%) with 71% acting alone. Over 90% had no known history of employees in
dishonesty (91%).
managerial
Another study is conducted biennially by the US-based Association of roles who are
Certified Fraud Examiners. In its 2014 Report to the Nations, 1,483 cases presented with
of occupational (internal) fraud were analysed. The profile of offenders
confirmed prior research. opportunities
to act
• 67% of perpetrators were male. dishonestly.
• 52% were aged between 31 and 45 years.
• 25% had been with the organisation for more than ten years.
These studies, show that serious fraud offenders tend to have similar
characteristics and are usually trusted employees in managerial roles who
are presented with opportunities to act dishonestly.
Motivations for acting dishonestly
Research has also been conducted into the primary motivations that
offenders have for acting dishonestly.
As one might expect, greed and cupidity feature as the primary motivation
in all the studies asserts Dr Smith. The next most-frequently reported
motivations related to the presence of financial difficulties that offenders
23The iFacts Employee Screening HANDBOOK Chapter four
Motivations for acting dishonestly continued
experienced, often caused by living beyond one’s means, or adopting a
lifestyle that exceeded one’s income. The presence of addictive gambling
behaviour was often the reason for the financial problems that motivated
acts of dishonesty, or, alternatively, offenders simply stole money in order
to engage in gambling.
These findings provide some of the regularly identified ‘red flags’ of
fraudulent conduct that include offenders having unstable patterns of
work, unwillingness to share duties with others and the need to work long
Having good
hours, or not take leave. In short – they have something to hide. internal business
controls in place
Other studies have examined specific personality factors associated with may assist in
people who commit fraud. Some of the personality traits that have been
associated with people found guilty of dishonesty in the detecting risks
workplace include: at the earliest
opportunity and
• A desire for control.
• Lack of reliability, responsibility, accountability.
also act as a
• Use of manipulation tactics with co-workers. deterrent for
• Lack of discipline, respect and sensitivity. opportunists.
Although it is impossible to predict with certainty exactly who will commit
fraud, there are approaches that help to reduce the risk of fraud in the
workplace. This can be achieved by ensuring that workplace disputes are
avoided by using employee screening practices effectively. Having good
internal business controls in place may assist in detecting risks at the
earliest opportunity and also act as a deterrent for opportunists.
2457 55 42
Embellished Embellished Dates of
skill set responsibilities employment
The Most Common
CV LIES
34 33
Job Academic
Title degree
26 18
Companies Accolades/
worked for awards
*Source: CareerBuilder, 2015 Employee Screening Survey 25Employee Theft
by Numbers
Percent of total
THEFTS
Percent of employees
who have stolen at least
committed by
A MANAGER
twice
from their employer
37.1 37.5
Percent of all business
Percent of employees
who have stolen bankruptcies
caused by employee theft
once
at least
from their employer
75
*Statistic Brain Research Institute: 2015 Employee Theft Survey 26CHAPTER Five
Developing an Employee
Screening Policy
27The iFacts Employee Screening HANDBOOK Chapter five
Developing an Employee Screening Policy
Fraud, deceit, bribery and corruption are by no means a new problem.
As early as 1602, Sir Edward Coke, Lord Chief Justice said that fraud
and deceit abound in these days more than in former times. Turn the
clock forward a few centuries and all that has really changed is the
methodology rather than the prevalence.
The best objective that companies and other The first
organisations can hope to achieve, is the step towards
operational standard and technical-level eradicating losses
procedures to ensure that employees and caused by fraud,
contractors working for a particular company corruption and
are screened to a suitable standard. theft is through
prevention. In
other words,
The first step towards eradicating losses caused by fraud, corruption and organisational
theft is through prevention. In other words, organisational leaders should leaders should
be looking at ways to prevent hostile employees or vendors from entering
the organisation in the first place. be looking at
ways to prevent
One of the most common ways in which hostile employees or vendors hostile employees
enter organisations or companies is through the falsifying of details on
their work applications. or vendors from
entering the
Good personnel management requires the examination of the organisation in the
trustworthiness and suitability of all employees to protect the employer’s
interests. This process usually involves reference enquiries, verification of first place.
qualifications and often credit and criminal history checks.
Most organisational security policies therefore require that individuals
undergo a screening process if their duties or tasks necessitate access to
sensitive information and assets.
At iFacts however, we recommend that all employees be screened
regardless of what access is granted. This applies to all positions and
to all phases of the contracting process. Employees should not be
appointed or given access to sensitive information and assets until the
checks are complete.
28The iFacts Employee Screening HANDBOOK Chapter five
The initial personnel screening process
comprises the following steps:
Determining screening requirements
One of the
most common
Identifying required checks ways in which
hostile employees
or vendors enter
Obtaining consent for the relevant organisations
checks or companies
is through the
falsifying of details
on their work
Processing reliability checks or
security assessments applications.
Evaluating results of reliability checks or
security assessment information
Granting or denying reliability status
or security clearances
Making an appointment or deployment
Briefing the screened person
29CHAPTER SIX
Pre-Employment checks
to be conducted
30The iFacts Employee Screening HANDBOOK Chapter SIX
Pre-Employment checks to be conducted
Employee Screening and checks to be conducted must be identified on
the application for employment form. Personnel screening processes
should include the following primary checks as part of the assessment
of reliability.
Employment Screening Methodology
• Pre-employment Screening
• Background Checks
• Individual Risk Assessment
• Biometric Assessments
• Criminal Record Checks
• Personal Profiles
• Verifications
• Truth Verification
• Integrity Tests
In addition, there can be mandatory as well as optional checks for each
level. The manager ensures that the mandatory checks are done and
decides, with advice and assistance from departmental HR or security
staff, which options are justified based on the sensitivity of the information
and assets accessed and the requirements of similar positions.
Optional Screening Methodology
• Reputational Assessments
• Integrity Tests
• Truth Verification Tests
• ull due diligence including links to other
F
companies, suppliers and staff members
31The iFacts Employee Screening HANDBOOK Chapter SIX
Current Employees
iFacts also recommends that regular checks should be made on existing
employees/contractors and permission for these should be considered in
the application for employment or service provision. If regular checks are
not part of the policy they can be made on employees prior to transfer or
promotion.
Situations may also occur which do not involve regular appointments
but where personnel screening is still required (for example, temporary
workers or contractors). In such cases departments must ensure that
before permitting access, the individual has the appropriate reliability
status or security clearance issued under the security policy or in line with
bilateral or international agreements.
A complete
range of
Employee Screening: a measurable return on screening, vetting
investment
and background
A complete range of screening, vetting and background checking
checking services
services is absolutely essential in today’s public and private sector is absolutely
environments, ensuring that only honest and ethical employees are
working within your organisation or department.
essential in
today’s public
The past few years have seen a plethora of negative media coverage and private sector
featuring high-level government officials, who have all been found guilty environments,
of various forms or fraud and corruption, including the falsification of
qualifications. ensuring that only
honest and ethical
The consequences of public and private sector fraud and corruption employees are
include: a substantial financial loss, a deep level of mistrust from
citizens, a decrease in global investment opportunities from international working within
stakeholders, and long-term reputational damage with ongoing your organisation
repercussions.
or department.
The South African Police Service reports corruption under the
broad category of ‘commercial crimes' and according to the
latest stats some 91 569 cases have been reported in the past
financial year.
Statistics from the Public Service Commission show that public sector
fraud cost the government close to R1 billion rand in 2011/2012. Based
on this estimate, the Institute for Accountability stated in 2012 that
the South African economy had lost some R675 billion as a result of
corruption since 1994. This is a significant amount of money that would
have been diverted away from government services and into the pockets
of corrupt politicians, officials, their associates and private business
people.
32The iFacts Employee Screening HANDBOOK Chapter SIX
When PricewaterhouseCoopers released its 2014 Global Economic
Crime Survey with more than 5 000 global respondents in 93 countries, it
stated that at least 69% of South African respondents indicated that they
had been subjected to some form of economic crime in the 24 months At iFacts
preceding the survey, compared to 37% of global respondents. The
2014 Global Economic Crime Survey went on to deliver a bitter blow for we believe that
ethics and integrity in South Africa. It exposed the shocking prevalence prevention is
of economic crime in South Africa, which is reportedly hit by more fraud,
bribery and corruption than any of its global counterparts. better than
dealing with the
In South Africa there are several laws that seek to curb corruption in the arduous process
public and private sector. These include the Prevention and Combating of
Corrupt Activities Act, the Public Finance Management Act and the Public of disciplinary
Service Act. In addition, the Public Administration Bill (which was adopted procedures and
by Parliament in March 2014 but still awaits approval by the president)
seeks to ban civil servants from conducting business with the state
even criminal
and compel them to disclose financial matters such as private business charges.
interests. However, at iFacts we believe that prevention is better than
dealing with the arduous process of disciplinary procedures and even
criminal charges.
In summary, fraud and corruption is a growing
concern and major threat to the wellbeing of the
public and private sector including government
departments and parastatals. It threatens
business processes, erodes the integrity of
employees and tarnishes business reputation.
Fraud and corruption is something that the
public and private sector needs to deal with
proactively in order to keep vital departments
operating as efficiently and ethically as
possible.
33Employee Screening
and Investigations
Statistics
The Numbers Speak
for Themselves
The 2015 iFacts statistics, which
provide an overview of the results FOR THE YEAR
2015
obtained as a result of background
checks and vetting services requested
by our clients, revealed the following:
22%
26%
of CV’s showed a number of
with a bad credit record
Major Fraud &
DISCREPANCIES Corruption Risk
%
Falsification of
experience &
qualifications FAILED
CHECKS
43% of directorship claims are
FRAUDULENT
Falsification of
experience & qualificationsCHAPTER SEVEN
Employee Screening Practical
Implementation
35The iFacts Employee Screening HANDBOOK Chapter SEVEN
Employee Screening Practical Implementation
The pre-employment and updated employee contracts must include
detailed information on the purpose of the employee screening process.
Emphasise that the implementation is for the greater good of the
organisation and all its employees, rather than aimed at targeting certain
applicants or employees. Emphasise the confidentiality and ensure that
applicants and employees know that all information will be treated with
the utmost respect and confidentiality.
Step One:
Consult with HR and your legal department about the
implementation of a pre-employment and ongoing
employment screening policy.
Step Two:
Compile a legally correct candidate consent form that is
A pre-employment
applicable to employees, contract employees and suppliers
background
Step Three: check is a sound
The policy should be written into job application business practice
documentation. that benefits
Step Four: everyone
The policy should be included in the employee contract.
Step Five:
All current employee contracts must be updated.
Step Six:
Contact a screening consultant for practical implementation.
36The iFacts Employee Screening HANDBOOK Chapter SEVEN
Employee Screening Policy
Sample Policy One:
To ensure that individuals who join this firm are well-qualified and have a
strong potential to be productive and successful, and to further ensure
that this firm maintains a safe and productive work environment that is
free of any form of violence, harassment or misconduct, it is the policy
of this company to perform pre-employment screening and credentials
verification on all applicants who are offered and accept an offer of
employment. A pre-employment background check is a sound business
practice that benefits everyone. It is not a reflection on a particular job
applicant.
Therefore, all offers of employment are conditioned upon the firm's
receipt of a pre-employment background screening investigation that is
acceptable to the firm at the firm's sole discretion. Any applicant who
refuses to sign a release form will not be eligible for employment.
All reports
All pre-employment background screenings are conducted by a third are kept strictly
party to ensure privacy. confidential, and
are only viewed
All screenings are conducted in strict conformity with the required
legislation. by individuals
in this firm who
All reports are kept strictly confidential, and are only viewed by have direct
individuals in this firm who have direct responsibility in the hiring process.
All screening reports are kept and maintained separately from your responsibility
personnel file. in the hiring
process.
All screenings are done only after a person has received a disclosure and
has signed a release. In addition, you have certain legal rights to discover
and to dispute or explain any information prepared by the third party
background-screening agency.
If the employer intends to deny employment wholly or partly because
of information obtained in a pre-employment check conducted by the
company's reporting agency, the applicant will first be provided with
a copy of the background report, a statement of rights, as well as the
name, address and phone number of the reporting agency to contact
about the results of the check or to dispute its accuracy.
The firm also reserves the right to conduct a background screening
anytime after you have been employed to determine eligibility for
promotion, reassignment or retention in the same manner as described
above.
37The iFacts Employee Screening HANDBOOK Chapter SEVEN
Employee Screening Policy – Sample Policy One CONTINUED
Applicants also are expected to provide references from their former
employers as well as educational reference information that can be used
to verify academic accomplishments and records.
Background checks may include verification of information provided on
the completed application for employment, the applicant's resume or on
other forms used in the hiring process. Information to be verified includes,
but is not limited to, the applicant’s identity number and previous
addresses.
The employer may also conduct a reference check and verification of
the applicant's education and employment background as stated on the
employment application or other documents listed above.
The background check may also include a criminal record check. If
a conviction is discovered, a determination will be made whether the
Additional
conviction is related to the position for which the individual is applying or checks such as
would present safety or security risks before an employment decision is
made. A criminal conviction does not necessarily automatically bar an
a driving record
applicant from employment. or credit report
may be made
Additional checks such as a driving record or credit report may be made on applicants
on applicants for particular job categories if appropriate and job-related.
Employment screening assessments to determine an applicant's job fit for particular
may also required of all applicants for employment. Skills tests related to job categories if
the demands of the job may also be required.
appropriate and
This firm relies upon the accuracy of information contained in the job-related
employment application, as well as the accuracy of other data presented
throughout the hiring process and employment, including any oral
interviews.
Any misrepresentations, falsifications, or material omissions in any of the
information or data may result in the firm's exclusion of the individual from
further consideration for employment or, if the person has been hired,
termination of employment.
In addition, in order to ensure a safe and profitable workplace, all
employees are required to report to their supervisor if they are arrested
and or charged for any criminal offense, with the exception of minor traffic
offenses unless the employee is in a driving position. Driving position
is any position where the employee drives on company time or for the
benefit of the company.
38The iFacts Employee Screening HANDBOOK Chapter SEVEN
If an employee is arrested or charged for any offense, the employee must
report the arrest or charge to their direct supervisor and submit a police The Policy
report or other documentation concerning the arrest and /or charges. The
report must occur within two business days of the arrest. The employer will help ensure
will not take any adverse action based only upon the fact of an arrest. Any the safety of the
action will be based upon the underlying facts of the arrest.
public as well as
Non-compliance with the above stated requirement constitutes grounds a safe working
for termination. Furthermore, misrepresentation of the circumstances environment at the
of the events can serve as ground for termination. Employees that are
unavailable for work due to incarceration are subject to suspension or Company.
termination.
39The iFacts Employee Screening HANDBOOK Chapter SEVEN
Employee Screening Policy
Sample Policy Two:
It is the policy of this company to perform pre-employment background
checks. The purpose of performing these checks is to determine and or
confirm, within appropriate legal and professional limits, the qualifications
and suitability of a job candidate for the particular position for which the
candidate is being considered.
The policy will help ensure the safety of the public as well as a safe
working environment at the company. The policy will help ensure that
employment-related decisions utilising pre-employment background
check are made in accordance with applicable law.
Introduction
Company Name will perform pre-employment background checks on all
candidates for employment. In addition, if an employee changes positions
in the company, any additional required background checks for that
position, which have not previously been performed will be performed. The policy
The components of each candidate’s background check will depend
will help ensure
on the job. Depending on the particular position, the Company currently the safety of the
performs identity and address-related searches, various types of criminal public as well as
(including sexual offender) background checks, employment credit
checks, and driving record, education, prior employment and professional a safe working
licence verifications. A list of each company position and the required environment at the
pre-employment background checks for that position is attached to
this policy. company.
The results of the pre-employment background check are confidential
and are to be shared with members of the company on a strict
“need-to-know” basis.
Disclaimers
It is not the purpose of this policy to provide detailed information or
descriptions of each individual pre-employment background check that
can be performed. It is not the purpose of this policy to provide detailed
information on how to make a final decision regarding the results of
a pre-employment background check; every case must be decided on
its own merits subject to the company requirement that all candidates
be treated equally and consistently. It is not the purpose of this policy to
provide detailed information of all applicable law. Questions about these
subjects should be directed to the Human Resources or
Legal Departments.
This policy does not limit the company’s right to hire, discipline or
terminate. This policy does not create a contract of employment. All
employment is at will unless contract or law applies to the contrary.
40The iFacts Employee Screening HANDBOOK Chapter SEVEN
Employee Screening Policy – Sample Policy TWO CONTINUED
Procedures
Pre-employment background checks are required for all candidates
for each position in the company and the required checks which
has been prepared by the Human Resources department (HR) in
consultation with the Legal Department (Legal). The right to perform
additional pre-employment background checks is reserved to HR
which shall consult Legal if deemed necessary.
All candidates will be required to sign appropriate authorisations
and consents prior to the performing of any pre-employment
background checks.
Candidates that provide false or misleading information in their
application and/or authorisation may be eliminated from any further
consideration. Candidates are expected to provide accurate and
complete information and not to omit material information needed
to make a decision.
Candidates
Pre-employment background checks should normally be completed
before a candidate is offered a position. All job offers should be
are expected to
conditioned upon satisfactory completion of the pre-employment provide accurate
background checks. and complete
All candidates shall be individually reviewed and decisions made information
with respect to employment based upon the totality of the and not to
candidate’s qualifications and the results of the pre-employment
background checks. omit material
information
In general, the relevance of a particular pre-employment
background check to a candidate’s eligibility for employment is needed to make
based upon the following factors: a decision.
• the nature of the job for which the applicant is being considered
• the nature of any adverse or negative information; in the case of a
criminal matter, the facts surrounding the matter are particularly
relevant
• the age of any adverse or negative information; the age of the
applicant at the time of
• the adverse incident in relation to the present may also be
relevant
Having adverse information, including a criminal history or
conviction does not automatically preclude a candidate’s eligibility
for employment.
Having adverse information, including a judgment, lien or
bankruptcy does not automatically preclude a candidate’s eligibility
for employment. Employment credit reports will be used as follows:
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