In the recent Citizen’s Advice Report, Too Good to be True? (March 2016), it was revealed that 10.9 million people have been the subject of unsolicited phone calls about their pension scheme benefits since April 2015. Fraudsters are targeting unsuspecting members of the public and this is borne out in RSM’s latest fraud report, in which over one third of schemes said they had experienced fraud – more than double the proportion in 2013.
In the latest RSM fraud risk report, 26 per cent of respondents were unaware that this absolute responsibility lies with the trustees.
Whilst this is a current topic for debate, there is no escaping the fact that trustees already have a statutory duty to demonstrate how they have complied with their duties of preventing and detecting fraud. So what should trustees be doing to mitigate the risk of fraud?
- Step 1 - include fraud risk and the related internal controls in your risk register and regularly test the internal controls. Extend the statement in your annual report covering key risks and internal controls to also consider fraud risk.
- Step 2 - define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action.
- Step 3 - consider fraud risk more regularly than at present - ideally at least twice a year in the current economic climate or where there have been significant changes in the administrative systems or personnel of the scheme.
- Step 4 - collate information on fraud cases and ensure the warning signs are widely recognised (whether in-house or at third party administrators) eg lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours (which may suggest financial problems), or whose lifestyle does not appear to be commensurate with their salary.
- Step 5 - educate trustees and scheme management so that they know how to recognise fraud and how to report it.
There is no doubt that fraud is a very real and growing concern for the industry. By taking the steps above and raising the profile of fraud risk, trustees can help to mitigate the risks of fraud being perpetrated against their scheme and its members.
If you would like any advice or have any questions, please get in touch with Elisabeth Storey or your usual RSM contact.