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The types of fraud social landlords are most vulnerable to and how to prevent them

Social landlords can be vulnerable to fraud of many kinds and preventing it involves embedding the right culture, writes Arun Chauhan

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Social landlords can be vulnerable to fraud of many kinds and preventing it involves embedding the right culture, writes Arun Chauhan #ukhousing

These are the types of fraud social landlords are most vulnerable to and how to prevent them, writes Arun Chauhan #ukhousing

“Fraud is a problem that undermines the stability and financial health of organisations across the economy. It is not a victimless crime and can be hugely damaging to any organisation – especially so to social housing organisations, where it often has the sort of direct, negative impact on the quality of life that is not found elsewhere,” so says the Centre of Counter Fraud Studies at the University of Portsmouth.

When it comes to fraud, housing associations are highly vulnerable. In 2018, it’s estimated that tenancy fraud cost the UK over £216m – including £55m through illegal subletting and £92m through fraudulent Right to Buy applications.

These are the most common types of fraud in housing associations:


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Tenancy fraud – when a tenant breaches certain terms of their agreement or misleads a housing association to secure a tenancy. Fraud can manifest itself in various ways. Some of the most common types include:

  • Application fraud – where false information is provided by a tenant to secure a property or where multiple applications are submitted simultaneously by the same prospective tenant for different properties, through different landlords in different locations.
  • Right to Buy fraud – when a tenant applies for a discount to purchase their council home while they provide false information, have applied for the discount where the property has been subject to another tenancy fraud, or enter into an agreement with a third party to purchase the property on their behalf.
  • Key selling fraud – where a tenant, or housing association employee, sells the keys for a house to someone who doesn’t have the right to live there.
  • Subletting fraud – where a tenant rents out some or all of their property without the permission or knowledge of the landlord.
  • Succession fraud – where a person moves into a property without permission when the legal tenant moves on or passes away.

Corporate fraud – although not exclusive to housing associations, corporate fraud commonly occurs in the social housing sector. Some of the common types include:

  • Bribery and collusion – where an employee colludes with a third-party contractor or supplier for personal gain.
  • Cybercrime – where an organisation falls victim to phishing or malicious software which is designed to damage systems, obtain data or cause re-direction of money.
  • Supplier fraud – where false, inflated or duplicate invoices are submitted by a supplier or they falsify information in a tender process.
  • Mandate fraud – where a third party impersonates a supplier and contacts a housing association to request a change to bank account details to divert all future payments.
  • Payroll fraud – where an employee corrupts the payroll system in order to receive funds which they are not entitled to. This could be carried out through the submission of false expenses.
  • Finance function fraud – this could include financial statement fraud, misappropriation of assets, bribes within the finance team or setting up of false nominals to create fictional costs.
  • Recruitment fraud – where a third party misrepresents themselves as an employee of a company to offer a false job opportunity.

Preventing fraud within any business isn’t easy. It’s about finding the balance between having the right processes in place to understand your risks and identify fraud and allowing autonomy and a positive culture of information-sharing which help prevent fraud in the first instance. Here are three ways in which housing associations can mitigate the risks:

1. Whistleblowing and other counter-fraud policies

Relevant anti-fraud policies and procedures can help you to ensure any suspected instances of fraudulent activity are detected, investigated and resolved quickly.

It’s important to consider stakeholders, such as employees, tenants, local councils, suppliers and contractors when designing your anti-fraud policies. They are often on your organisation’s frontline and will frequently be the first to witness any dishonest activity.

For your policies to be effective, it’s crucial they’re well communicated with your team and stakeholders, reviewed on a regular basis – particularly as your organisation evolves – and that employees are given regular training.

2. Get your culture right

Policies on their own are insufficient. Your organisation’s culture is key in mitigating your risk of fraud. This is heavily influenced by your leaders – they set the tone for those they manage.

If your leaders get their culture right, teams will be motivated to help your organisation achieve its goals. This engagement is vital in protecting you against fraud because disenchanted employees hold little loyalty towards protecting your business.

Your team is your eyes and ears. Look after them and they’ll look after your business.

3. Promote information-sharing and best practice

Once you’ve got the right culture, promote trust and information-sharing throughout your organisation. If your employees feel comfortable around their leaders, they’re more likely to consult them when they see something that doesn’t look right. Share best practice, emphasise the importance of compliance to all employees and shareholders. Your leaders should demonstrate a rigorous attitude to compliance for employees to follow.

The impact of fraud within housing associations extends beyond financial losses. It’s also about protecting the people you strive to help. The impact of any fraud can be substantial as, ultimately, it will cause a loss of funds that result in a tenant losing the opportunity for an affordable home.

The processes and policies alone aren’t enough. It’s about getting the right culture – set by your leadership – encouraging engagement and promoting trust.

Arun Chauhan, founder and director, Tenet Compliance & Litigation; and deputy chair, Fraud Advisory Panel

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