Vetting in practice

The vetting of prospective staff can be an employer's first line of defence in weeding out undesirables, explains Andrew Durant

Recent events leading to the fiasco over the vetting of teaching staff by the newly-formed Criminal Records Bureau (CRB) have at last highlighted the need for the thorough vetting of individuals taking up employment.
But why only teachers? Why not everybody? Before they open their doors to new starters, all businesses should stop and ask themselves: “Do I really know this person well enough to trust them with my money, confidential information and, above all, my reputation?” Many companies believe that their recruitment procedures will deal with this question. However, they should bear in mind that a recent Mori poll revealed that:
•30 per cent of people admit to lying while applying for jobs;
•18 per cent think it is necessary to exaggerate on their CV;
•34 per cent of managers do not check the background of applicants;
•36 per cent of organisations state that untruths on CVs cost them significant time and money.

The news that Alfred Dunlap, the fired chairman and chief executive of Sunbeam in the US, had also been axed from two previous jobs – and that the two major search firms checking his employment history never uncovered those dismissals – therefore comes as no surprise.
When carrying out investigations, we often find that the suspect has a chequered history not disclosed during the recruitment process. Recruitment is the first line of defence in fighting fraud and hence effort spent at this stage can save thousands of pounds in investigation and legal costs when a fraud comes to light. In the case of Dunlap, it has now emerged that he was embroiled in lengthy litigation with a previous employer alleging fraud.
Closer to home, in the case of Barings, Nick Leeson failed to declare County Court Judgments (CCJs) against him and the fact that the Securities and Futures Authority turned him down for accreditation. Barings failed to detect this and sent him to Singapore, where he successfully applied to operate as a trader.
During an investigation into the food and drinks industry, a review of the suspect's personnel file highlighted that references had been requested from previous employers but only one had been received. His previous employer had not responded and no one had followed this up. One phone call by a member of the investigation team highlighted the fact that he had been sacked for a similar fraud.
Many employers are just as lax when it comes to the recruitment of senior staff, including directors. In fact, there seems to be an inverse relationship between the seniority of staff and the level of due diligence performed. There is a presumption that a previous employer must have carried out appropriate checks, but this should not be assumed.
Organisations should check each new candidate thoroughly. The more senior the position, the more thorough this checking should be. Senior staff have more opportunity to commit fraud because they are in positions of trust and tend to have the ability to authorise payments and approve contracts. They are also more likely to commit frauds that can damage their organisation permanently.
Checks should also cover an individual's complete work history. In the case of Dunlap, the checks did not go back far enough. If they had done, they might have uncovered the fact that his employment was terminated after seven weeks by one previous employer and after two years by another. Sunbeam would then have been able to make an informed decision based on full information.

Preventative steps
Apart from a criminal record check through the CRB, which must be initiated by the prospective employee, what else should an employer be doing?
•Confirm name and address to guard against false details and identity theft to conceal a chequered past.
•Confirm educational qualifications. It is only too easy these days to produce a 'cut-and-paste' certificate from some obscure and largely unknown college.
•Check membership of professional bodies. Manchester United Football Club once had to release their director of communications before she had even taken up her role. She had neglected to tell her prospective employer that she had been barred from practising law. She had also claimed falsely that she had previously advised Tony Blair on public relations.
•Confirm employment history. Check at least the last three employers and review positions held and dates of leaving. Ask for explanations for any gaps that may appear.
•Check financial status. Search the Electoral Roll for CCJs and the Insolvency Service for bankruptcy;
•Confirm directorships held and any disqualifications. A simple check with Companies House will confirm current and previous directorships, together with disqualification dates.
•Media and internet search. This can identify individuals in the news and associations with third parties.

Ongoing process
Vetting is not only for new recruits. It should be an ongoing process across the whole workforce. The current situation relates only to new teacher appointments – it does not deal with those already employed. It therefore raises the following wider questions in relation to vetting:
•What if an individual commenced employment many years ago, when vetting was less rigorous?
•What if an individual's circumstances have changed, such that they now find themselves under severe financial pressures?

When staff with more than 10 years service are responsible for one-third of all frauds, you can easily see why it is important to adopt continual vetting procedures.
Andrew Durant is a partner in BDO Stoy Hayward's fraud services team

The dos and don'ts of the recruitment process

•Ask all potential employees to complete a detailed application form
•Look for gaps in employment history
•Request written references and check by telephone
•Check all qualifications
•Carry out in-depth due diligence in relation to senior employees
•If possible, obtain details of criminal records
•Carry out checks on temporary and contract staff as well
•Rely only on a CV provided by the applicant
•Limit checks to, say, the past 10 years only
•Accept 'to whom it may concern' reference letters
•Accept copy certificates
•Assume a previous employer has carried out full and proper due diligence
•Accept verbal representations at face value