Tsogo Sun Casino employees arrested for R4m payroll fraud

An HR employee was allegedly involved in what Ian McAlister says is the most difficult type of payroll fraud to detect.

The Times has reported that two Tsogo Son Casinos employees have been arrested for stealing R4 million. Jeffery Moodley and Leeba Lesuthu, who worked in security and human resources respectively, are alleged to have set up ghost employees on the company's payroll and withdrawing salaries paid into fictitious accounts.

The two have since been charged with 259 counts of fraud and granted R10 000 bail each.

CRS Technologies general manager Ian McAlister says this is the most difficult type of payroll fraud to detect, particularly in large companies.

“A ghost employee is a fictitious person on the company payroll who does not actually work for the organisation,” he explains. “It could be someone who left the company or passed away, or even a fictitious person with a fake ID number but valid bank account into which a salary is paid each month. The holder of the bank account is usually the perpetrator of the ghost employee fraud.

Another example, Ian says, is when fraudsters use two different ID number to create a clone of a real employee who then appears twice on the payroll. The employee’s salary is then split between the two identities but only one identity receives a tax certificate, enabling the perpetrator to declare less than what he/she actually earns to the tax collecting authority.

Given that salaries are usually the biggest expense, it follows that failure to detect ghost employees can result in considerable financial loss over time and poses a serious threat to an organisation's profitability and sustainability.

Ian recommends carrying out audits at least once a quarter to ensure that the number of employees on the payroll actually exist and equal the number of people employed. 

Says Ian: “Perform frequent spot audits to check that employees’ earnings, allowances and other remuneration additions are correct and in accordance with their employment contracts. Any changes to an employee’s earnings must be approved by a senior manager and not the payroll administrator. If possible, a multiple-party approval process should be followed to mitigate collusion. It is also advisable to run comparison reports between various payroll periods. Any variance of more than a predefined percentage occurs should raise a red flag.”