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Lessons for Australian recruiters in $US5.4 million fraud

Views 3 Views    Comments 0 Comments    Share Share    Posted 28-06-2009  
A $US5.4 million fraud in North America highlights the need for Australian recruiters to ensure they carefully check the credit references of potential clients.

Six Colorado men have been charged with setting up fake client companies, and then appointing recruitment agencies to payroll their on-hire workers.

About 40 recruitment companies including Kelly, Adecco, Robert Half and Manpower were duped by the group, who allegedly placed each other as contractors and submitted false time sheets for themselves and other fake employees.

The defendants then refused to pay the recruiters, using a range of excuses including that their own clients were slow to pay.

Once a recruitment company had ceased paying their contractors, the syndicate would set up a new company shell and appoint another recruitment company to run the scam again.

The alleged fraud took place between 2002 and 2005 and the defendants each face up to 20 years in prison for a range of offences. They will appear in a US district court next week.

Dot the Ts and cross the Is

The case is a reminder for recruiters to manage credit control and debtor days carefully, says specialist recruitment company advisor Ross Clennett.

Clennett told Recruiter Daily associate publication Shortlist that if this process was done well, a situation like the US example was unlikely to arise.

"It`s about crossing the Ts and dotting the Is in every case, and not getting too carried away with a new client `supposedly` wanting to give you a big batch of business," said Clennett.

Be wary of new clients

Recruitment industry benchmarking specialist Nigel Harse, from the RIB Report, said a similar fraud could easily be carried out in Australia.

"Of course it could happen here, if people don`t keep an eye on their credit control and follow a rigid process."

Harse said credit control and debtor management in small to medium recruitment companies is often not as good as it could be.

"Very few credit references are taken, if any, and rarely does anyone try to get a director`s guarantee. And quite often clients are allowed to trade outside the seven-day trading terms that most recruitment companies try to impose for contractors."

He said those three shortfalls would allow a scam to be underway for up to six weeks before anything was noticed.

"And to be honest, with the market like it is at present, it would be quite appealing for a small recruiter trying to get into a new sector to be offered some lucrative sounding work," Harse said.

Source:
http://www.recruiterdaily.com.au/nl06_news_selected.php?act=2&stream=1&selkey=39
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