Ghost workers:

Who are they? and how to deal with them

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Don’t blame the ghosts; they may be 100% innocent, and they’re certainly not the ones getting rich.

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What can be done about it?

Who are the Ghost Workers?

Todays agenda

Who is profiting?

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Kenya orders probe into 12,000 ghost workers on payrollhttp://www.bbc.com/news/world-africa-30137326

Nigeria cuts 23,000 Ghost Workers from Government payroll

http://money.cnn.com/2016/02/29/news/economy/nigeria-ghost-workers/

Get rid of ghost workers’, says IMF’http://af.reuters.com/article/zimbabweNews/idAFL6N0SI4FB20141023

Afghan police payroll under scrutiny from U.S. watchdoghttp://www.reuters.com/article/us-usa-afghanistan-police-idUSBREA2I0YR20140319

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29 percent of all organizations globally experience payroll fraud.29%

Time to detection, among the longest of all fraud types.

24 months

Source: Association of Certified Fraud Examiners

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Section 1 Who are the ghost workers?

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Three types of ghosts and fraudulent schemes

Real person leaves/dies but remains on the roll

Fictitious persons

Real persons

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Real person leaves/dies but remains on the roll

Fictitious persons

The key features of the schemes

Real persons

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Invented by someone with influence. True ghost workers. The largest schemes. Easiest to detect

Collaboration. Kick-backs for a job. Or maybe they are just late for work? Or sick? Hardest to detect.

Can also be poor and inaccurate processing? Is someone actually getting paid?

Establishing a scheme requires cooperation of several individuals

1. Hiring

2. Authoriz

ation

3. Payment

1. Ghost workers will need to be hired and put on some listing or register

2. Authorization for payment will be required for each pay period

3. The ghosts will need to access their pay, in cash or via bank transfer

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A person dies and remains on the payroll

Fictitious persons as ghost workers

• Not difficult in cash based payment systems, which still exist in many fragile countries.

• Real people come with high costs and risks as every participant wants a share.

• Each individual aware of the scam increases the risk.

• Can be detected by biometrics• Requires coordination

increases detection impact on network

• Low detection probability• Concentrated profits• Few people involved

Pros Cons

Issues for detection of ghost worker schemes

• The earnings potential is small as the scheme only relies on past employees.

• Larger scheme, hence a potential higher cost.

Real persons as ghost workers

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Section 2 Who is profiting?

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47 percent of payroll perpetrators in upper management or accounting/finance

Source: Association of Certified Fraud Examiners

Accounting/finance

Upper management

All other

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Kick-backs: Real person schemes are hard to detect

Desperation on the supply side of the labour market and the consequences of weak rule of law will come to bear on people’s tolerance to participate in such schemes.

• Staff will pay part of their salary and some may even find it legitimate; in some cases they are.

• While clearly poor practice, a lack of transparent rules leaves room for interpretation and uncertainty, ripe for opportunists.

• Even if the situation is unfair they will likely conclude that part of a salary is better than none.

• In countries with weak rule of law, the consequences of dissention can go beyond loss of income.

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Decentralized schemes are often built around the Line Manager’s authority

• Accountable for basic controls

• Enforced to decide on their own.

• In weak control environments there are also low barriers to Line Managers being directed by more senior officials.

• Need to consider the hiring process and budget caps on staff. In particular:• Budget passed by senior

authorities and therefore a possible deal breaker

• The HR department would need to authorize the employment of a new employee.

Why they are exposed Constraints on them

‘ You see, when working here, Part of the salary needs to be repaid in order to cover costs. Budgets are tight and everyone needs to pitch in. There’s lunch, transportation, building maintenance costs; this list goes on’

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Section 3: What can done about it?

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Basic controls can discourage and limit opportunities for ghost worker fraud

Limit the Ghost

Workers

Segregation of authorities and duties

Substantive reviews of payroll at multiple levels

Identify exceptions & follow up with

consequences

Informed management and

executives

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But folks, get real, what can be done by a fragile government in a war-zone?

• Cultivating a control environment is far from impossible

• It is on the contrary, remarkably normal

• It is a matter of working out how to achieve what would otherwise would be normal, in extraordinary circumstances

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