Anyone who works in finance should always be aware of the risk of fraud, which can affect any organisation. In a now largely forgotten story, this lesson was particularly brought home when a £5.3m fraud was found to have been perpetrated by an employee of none other than the Metropolitan Police, who had stolen huge sums from his employers.
Over a period of a little under a decade, Anthony Williams had embezzled money that was primarily meant for counterterrorism. As a very senior accountant in his organisation, who was managing funds for necessarily covert operations, he had been given unsupervised access to large amounts of money, without proper checks, balances or reporting requirements.
Mr William spent this stolen money on a lavish lifestyle that his civil service salary would never have justified. He drove an expensive car and had homes in Surrey, Westminster and Spain. The majority of the stolen cash was spent in a small Scottish village near Aberdeen called Tomintoul, where he styled himself as the ‘Laird’ with a title purchased for £80,000. He spent £1m renovating the local hotel there and invested extensively in local businesses and property. For anyone who questioned his expenditure, he claimed to have received a large inheritance from an uncle in Norway.
The fraud was discovered in 1994, not by the police themselves but by the local bank branch in Tomintoul that noticed that Mr Williams' transactions looked suspicious. Williams was sentenced to seven and a half years in prison, and his current whereabouts are unknown: if still alive, he would now be 86. Many assets were sold to recover the funds stolen, but it is estimated that the total cost to the taxpayer from the fraud was still £1.2m.
There are lessons that all finance professionals can learn from this story. Firstly: nobody, no matter how senior or apparently trustworthy, should be given the sole, unsupervised ability to manage large amounts of money with no one else checking on things. Although this may sound obvious, it is clearly not a sentiment the Metropolitan Police properly adopted in this instance in the 1980s and 1990s. I would imagine that there are still many organisations and businesses that are taking undue risks, with individuals being trusted to manage large funds without proper oversight. Organisations should maintain whistleblowing procedures and create a culture where junior staff are able to raise legitimate concerns about more senior staff.
Whilst most of us clearly don’t work with top secret matters of national security like the Metropolitan Police do, in any instance ‘confidentiality’ is not a suitable reason for no checks and balances, or having only one person managing funds without supervision. Any claims that something can’t be checked by anyone because it is confidential should be treated with a degree of professional scepticism.
Frauds often start small and grow larger as perpetrators gain more confidence when they are not caught. This was true in Andrew Williams’ case: Mr Williams had previously stolen much smaller sums from a staff welfare fund. Whilst it is normal to have tighter controls around larger sums of money, having good procedures and checks and balances even for the pennies is still important.
Finally, the old adage applies that if something looks too good to be true, it might just not be true. If someone’s lifestyle seems far out of kilter with their salary, this is a well-known risk factor for fraud. Most people who say they have got an inheritance from Norwegian uncles probably have, but instigating proper checks when that person also manages substantial sums of an organisation’s money will not do any harm.
As treasury management advisors, Arlingclose are able to advise our clients on some of these key areas. In particular, treasury management strategies should cover segregation of duties, recording arrangements, lists of authorised individuals, internal and external audit arrangements, schemes of delegation (who can authorise what), arrangements for changes in payment details, whistle-blowing and anti-money laundering procedures. If you require any further information, please contact lfallon@arlingclose.com.
