ANTI - FRAUD STRATEGY



ANTI-FRAUD & CORRUPTION POLICY

1. INTRODUCTION

The Council’s Finance and Support Services Committee on 1 February 1999 approved the introduction of an Anti – Fraud Policy. The Policy was last updated in September 2003 and this new policy represents amendments approved in April 2006.

2. POLICY AIMS AND OBJECTIVES

The aims and objectives of the policy are to prevent, deter and detect fraud, corruption and other irregularity and its intentions where it is suspected and/or committed. In addition, the aim of this policy is to clearly communicate the City Council’s stance on fraud both internally and externally and to generally strengthen the Council’s anti – fraud culture.

The Council is committed to the highest ethical standards and requires Members, Chief Officers and all other staff, including those of contractors to make themselves aware of and comply with the seven principles of public life as defined in the Nolan Report[1]. These principles are:

SELFLESSNESS

INTEGRITY

OBJECTIVITY

ACCOUNTABILITY

OPENNESS

HONESTY

LEADERSHIP

3. POLICY JURISDICTION

The Anti – Fraud and Corruption Policy relates to Members, Chief Officers, Council staff, contractors (and their staff), consultants and all individuals and groups who receive Council services. The Policy lays down the standards of behaviour it expects and the Council’s intentions in respect of the prevention, deterrence and detection of fraud, corruption and other irregularity.

The City Council expects Members, Chief Officers and all other staff, including contractors and their staff providing Council services, to act with integrity at all times, to be totally honest and trustworthy and to comply with all laws and regulations applicable to the Council’s business.

Fraud, corruption and other irregularity will not be tolerated whether it is perpetrated against the City Council or elsewhere, i.e. by its staff against another organisation.

This policy will be given wide circulation to ensure it is recognised and adhered to.

4. ANTI – FRAUD AND CORRUPTION STRATEGY

To accompany this policy, there is an Anti-Fraud and Corruption Strategy. The strategy must be read in conjunction with this policy as it sets down the detailed manner in which the City Council is to deter, detect and prevent fraud and corruption. In addition, the Strategy provides detailed information and guidance on the manner in which suspected fraudulent or corrupt activity can be reported and how the City Council will act in these circumstances.

ANTI-FRAUD & CORRUPTION STRATEGY

1. INTRODUCTION

1.1 The City Council has a clear Anti–Fraud Policy and is committed to preventing, detecting and deterring fraud, corruption or other irregularity from happening and to take action where this is suspected or detected.

1.2 An effective Anti-Fraud and Corruption Strategy is key to the City Council in directing and controlling its business with openness, integrity and accountability. The Strategy also demonstrates the Council’s attitudes toward fraud and corruption and how it intends to act.

The City Council is therefore committed to a Strategy designed to:

• enhance and maintain an anti-fraud culture

• actively encourage prevention

• act as a deterrent to fraudulent and corrupt acts

• promote detection

• provide clear guidance on roles and responsibilities

• identify a clear pathway for investigation and remedial action

2. WHAT is FRAUD and CORRUPTION?

1. Fraud and Corruption are generic terms, definitions include:

“A deception deliberately practiced in order to secure unfair or unlawful gain”.

“The offering, giving, soliciting or acceptance of an inducement or a reward, which may influence the action of any person.”

“The use of one’s position of trust for personal gain”

“A lack of integrity or honesty (especially susceptibility to bribery)”

The Audit Commission defines fraud as :

“The intentional distortion of financial statements or other records by persons internal or external to the authority which is carried out to conceal the misappropriation of assets or otherwise for gain”

These definitions therefore encompass acts involving:

• Theft

• Deception

• Bribery

• Forgery

• Extortion

• Corruption

• Conspiracy

• Embezzlement

• Misappropriation

• False representation

• Concealment of material facts

• Collusion.

3. FRAUD AND CORRUPTION - PREVENTION AND DETECTION

3.1 Roles and Responsibilities of Chief Officers

Chief Officers and their managers have the responsibility to ensure that there are sound systems of internal control within their departments and, in respect of contracted out services, to determine the risk of fraud, corruption and irregularity and incorporate appropriate controls and safeguards within tender documentation and in the process of tender evaluation.

Controls should be designed and implemented to reduce the risks posed by fraud and ensure, as far as possible, its detection should it occur. Chief Officers and their managers must implement agreed Audit recommendations in accordance with agreed time scales to ensure that systems are maintained appropriately to prevent and detect fraud.

3.2 Roles and Responsibilities of Contractors

The role of contractors is no different from that of Chief Officers in relation to controls operated on behalf of the Council. As such, contractors should ensure they have adequate systems and controls to ensure the prevention and detection of fraud and corruption. In addition, contractors also have responsibility for ensuring that agreed Audit recommendations for improvements in systems and control are implemented within agreed time scales to maintain adequate anti – fraud measures.

3.3 Roles and Responsibilities of Internal Audit

The City Council has a statutory responsibility to maintain an adequate and effective Internal Audit function. This responsibility currently rests with the Director of Finance (DoF) who discharges these duties through the Internal Audit Service. The DoF arranges the Internal Audit of the Council’s Internal Control systems and has responsibility for Internal Audit planning, direction, standards and coverage.

Internal Audit coverage is risk based and the annual planning cycle provides an opportunity for Chief Officers to draw attention to their concerns. In accordance with the Audit Plan, Internal Audit are responsible for reviewing and appraising the adequacy, reliability and effectiveness of the Council’s systems of internal control and reporting to Chief Officers and managers. Internal Audit are also responsible for following up agreed recommendations to confirm that these have been implemented by Chief Officers in accordance with agreed timescales.

3.4 Roles and Responsibilities of Members

The conduct of Members is governed by the National Code of Conduct for Members which is set out in full in the City Council’s Code of Governance, together with some associated guidance. Members agree to abide by the Code when accepting office. The most important principle enshrined in the Code is that:

“It is not enough to avoid actual impropriety. You should at all times avoid any occasion for suspicion and any appearance of improper conduct”.

3.5 Roles and Responsibilities of the Audit and Performance Overview and Scrutiny Sub-Committee

The remit of the sub-committee is to:

• Ensure effective control over the City Council’s activities by monitoring, appraising and reporting upon the City Council’s internal control procedures;

• Ensure there is an effective anti-fraud culture and to advise on the promotion of probity and good practice within the City Council;

• To review and scrutinise as appropriate matters arising from the investigation and reporting of fraud or irregularity;

• To review and scrutinise as appropriate matters arising from the Internal Auditors’ reports;

• To liaise with the external auditors over the annual audit programme and to recommend for approval both the internal and external audit programmes; and

• To review and scrutinise as appropriate matters arising from the external auditors’ reports.

Internal Audit report periodically to the Audit and Performance Sub-Committee in accordance with the agreed timetable.

3.6 Recruitment of Staff and Staff Vetting

It is important to ensure that the integrity of Council systems is maintained. A key element in this process is to ensure that the Council employs staff of the appropriate quality and integrity. As such, whilst the procedures concerning the appointment of staff are a small part of the Council’s systems and controls it is considered to be a vital element.

The Recruitment Code of Practice as part of the Council’s HR Framework provides guidance on the appointment of the successful individual.

The Council will ensure staff provide adequate proof of identity and permission to work in the UK. Staff are appointed subject to satisfactory references and care is to be taken to ensure that employment references and qualifications are genuine. Copies of appropriate qualifications will be requested and held on the relevant personal file. For certain posts checks to the Police Criminal Records Bureau and List 99 are necessary and will be carried out. Records of these checks and their outcome will be maintained.

In addition, the Council’s employment application form includes an “Applicant’s Declaration”. This declaration enables confirmation by each applicant of their understanding that if false information is provided which leads to their appointment, or it is subsequently discovered that false information has been supplied, it will render them liable to dismissal without notice. Due regard will also be made in respect of the Rehabilitation of Offenders in relation to “spent” and “unspent” convictions. The Council’s HR Framework Recruitment Code contains specific information on the way in which this sensitive area is to be handled.

The Council requires contractors to also properly vet applicants who will be working on Council contracts. The precise requirements on contractors to comply with this are included in the standard terms and conditions of every contract issued by the City Council.

3.7 Redress and Recovery

Within the Internal Audit function there is a specialist team that investigates fraud, corruption and other potential irregularities. Disciplinary action and /or other legal action, including prosecution, will be taken against those found and proven to be defrauding the City Council. In addition, the City Council may in certain circumstances offer an alternative to prosecution in the case of Housing Benefit fraud and in accordance with its sanctions and prosecution policy.

In addition, all appropriate financial and other redress will be pursued to recover assets that have been lost as a result of fraudulent acts.

3.8 Publicity

All publicity will seek to promote the message that the City Council will not tolerate fraud, corruption of any other form of irregularity and is committed to countering any that is perpetrated.

Methods of publicity for the Council’s anti-fraud action are included in a rolling programme of planned and unplanned publicity. This may include the use of warnings on Council application forms, City Council newsletters and intranet, local newspaper advertisements, articles and features through local radio, television and other relevant media. It is City Council policy that all successful prosecutions are reported to the media via the Council’s Communications Team where it is considered appropriate to do so.

3.9 Fraud Hotline

The City Council has established a “freephone” fraud hotline. The number is answered by trained fraud investigators within Internal Audit. The hot–line is manned during normal office hours, and an answering services operates at all other times.

Staff and the public alike are encouraged to ring the hotline with any information about known or suspected fraudulent activity. All information is treated in the strictest confidence and if callers wish to remain anonymous, then that will be respected.

In accordance with the rolling publicity programme, publicity will be given to the hot-line on a regular basis. The hot-line appears on the City Council’s web site and there is also an opportunity for those wishing to report suspected fraud to do so via email to a designated Council email address. The hotline number is 0800 028 9888.

3.10 Gifts and Hospitality

The Code of Governance gives clear advice to both Members and officers on the acceptance of gifts and hospitality. The guidance must be followed at all times to ensure that the integrity of Members and officers is not compromised.

3.11 Whistleblowing

The guidance for officers/Members set out in the City Council’s Code of Governance contains a section on “Whistleblowing” and an officer’s/Member’s duty to “speak up”. This is important in the context of fraud prevention and detection and the following paragraphs set out officers’ and Members’ responsibilities the processes when a Whistleblower comes forward.

The City Council encourages both members and officers to report their concerns when the interests of others or the organisation itself are at risk. The Whistle-blowing Policy and guidelines have been developed so that Members and Officers know how to raise a concern in the right way at an early stage and are assured that concerns raised will be dealt with properly and appropriately.

The City Council will not tolerate the victimisation or harassment of anyone raising a genuine concern. Employees are protected from victimisation and harassment when raising genuine concerns by the Public Interest Disclosures Act 1998. This legislation aims to ensure employees who may be worried about coming forward can do so in the knowledge that it is safe to do so.

Members and staff are advised that where their concern falls into one or more of the following areas they should come forward:

• A criminal act;

• A failure to comply with any legal obligation;

• Danger to health and safety;

• Breaking the Law;

• Danger to Health and safety;

• Any damage to the Environment;

• Breach of the Code of Governance;

• An attempt to cover up any of these.

3.12 Anti-Money Laundering

Money Laundering is an act falling within section 340(11) of the Proceeds of Crime Act 2002 (POCA). Money laundering is also an offence under section 18 of the Terrorism Act 2000. The term “money laundering” is used for a number of offences involving the proceeds of crime or terrorist funds. The following actions constitute money laundering:

• Concealing, disguising, converting, transferring or removing criminal property from England and Wales, or from Scotland, or from Northern Ireland;

• Becoming concerned in an arrangement in which someone knowingly or suspects or facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person;

• Acquiring, using or possessing criminal property.

In accordance with section 332 of POCA the City Council has appointed a Money Laundering Reporting Officer (MLRO). The MLRO is responsible for:

• Making those staff most likely to be exposed to or suspicious of money laundering situations aware of the requirements and obligations placed on the Council, and on them as individuals, by the Proceeds of Crime Act 2002 and the Terrorism Act 2000;

• Give targeted training to those considered to be most likely to encounter money laundering;

• Make arrangements to receive and manage the concerns of staff (and contractors) about money laundering and their suspicion of it, to make internal enquiries, and to make reports, where necessary to the National Crime Intelligence Service (NCIS);

• Establish internal procedures to help forestall and prevent money laundering.

3.13 Proactive Anti-Fraud Initiatives

There is an annual risk based proactive anti-fraud programme, which targets resources to specific areas where there is a higher risk of fraud.

The City Council is determined to take action on fraud and corruption and promote initiatives that can lead to a reduction in the occurrence of fraud. The Internal Audit service is required not only to investigate fraud cases but also to submit proposals throughout the contract term for proactive fraud initiatives. Data matching is in use both within Westminster City Council and outside and is an extremely successful means of identifying fraud. Internal Audit will continue to make increasing use of the opportunities that Information Technology provides.

The Council will continue to participate in Anti-Fraud initiatives established by the Department for Work and Pension’s Housing Benefit Matching Service and the Audit Commission’s National Fraud Initiative. In addition, the Council will continue to foster links to undertake specific fraud drives and exchange information with other external agencies including the Police, Benefit Agencies, Inland Revenue, Customs and Excise, and other Councils.

From time to time the Council may run its own data matching exercises against its own databases. This may include systems holding information about Council employees (payroll and personnel), claimants of Housing/Council Tax Benefit and recipients of Student Awards. Other systems will also be considered such as Residents Parking. The use of contractor’s data for the purposes of identifying fraud is currently under review.

In conducting data matching exercises the Council will have due regard for its responsibilities in complying with relevant legislation such as the Data Protection Act 1998.

3.14 Fraud Business Plan

In 2005 a Corporate Counter Fraud Business Plan has been introduced. This plan details the provision of the Counter Fraud Service for 2005/06 and beyond. The Corporate Counter Fraud Service encompasses the provision of Housing Benefit fraud investigation and other Corporate fraud investigation.

This Business Plan sets out the manner in which the Corporate Counter Fraud Service will operate to ensure that it maximises fraud prevention, detection and deterrence in Westminster.

The overriding aim of the team is to deliver a quality investigative service with the objective of preventing, detecting and deterring fraud throughout the Council, thereby securing the public purse. The specific scope, aims and objectives of the team are to:

• Carry out investigation of “reactive” Housing Benefit and Corporate fraud referrals to determine whether fraud has occurred;

• Carry out investigation of “pro-active” Housing Benefit and Corporate fraud referrals, including those arising from the Housing Benefit Matching Service and the National Fraud Initiative, to detect where fraud or overpayment has occurred;

• Apply appropriate sanctions and redress where it is proven that fraud has taken place in accordance with the City Council’s prosecution (sanction) policy and disciplinary code where appropriate;

• Identify appropriate means to further tackle Housing Benefit and Corporate fraud including the development of new and innovative proactive exercises;

• Encourage referrals of suspected fraud from both internal and external sources;

• Evaluate all referrals to determine whether resources could be effectively deployed to investigate;

• Carry out all investigations in accordance with prevailing legislation;

• Adhere to the newly published DWP Performance Standards in relation to Housing Benefits and any other recognised best practice;

• Liaise with the City Council’s City Solicitors, the Police and Crown Prosecution Service and the Department for Work and Pensions Solicitors branch as appropriate in all cases of prosecution;

• Provide feedback to the Benefits Service on cases of successful sanctions;

• Obtain publicity in the press for successful prosecution cases;

• Report Counter Fraud activity to the Internal Audit Client and City Council members as directed;

• Liaise with the Counter Fraud Investigation Service of the Department for Work and Pensions in accordance with prevailing Partnership Agreements;

• Liaise with partners in the Housing Benefits Service, including the Fraud Liaison Officers and other Council departments where appropriate;

• Ensure Housing Benefit Investigation officers are appropriately trained and qualified;

• Participate in local and/or national forums regarding Housing Benefit and Corporate Fraud.

• Respond to and comply with directives issued by the DWP in the form of Circulars;

• Comply with the investigators Code of Conduct;

• Maintain an up to date working knowledge of changes in legislation and best practice and to act accordingly;

• Review Anti-Fraud Policies and Strategies on an annual basis taking on board changes in legislation and any emerging best practice.

3.15 Anti-Fraud and Corruption Training and Awareness

The City Council places a high emphasis on ensuring that the Anti–Fraud and Corruption Policy and Strategy are well publicised and that all those who have obligations under the policy and strategy understand this.

Fraud awareness sessions are now regularly run for managers and staff. The agenda has been revised to meet changing needs and further interactive workshops have been run. On a continual basis and in accordance with the rolling plan previously mentioned the City Council will continue to review the best methods for communicating these to members, staff, contractors and all other service providers and users.

3.16 Training for Investigators

The City Council’s Internal Audit provider ensures that its investigators are fully trained in carrying out their responsibilities and that this training is maintained to ensure continuous improvement. This includes, where appropriate, relevant qualifications such as the Professionalism in Security (PINS) accreditation. All investigators are also required to sign up to and comply with a code of conduct for investigations.

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[1] For further details see the Council’s Code of Governance.

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