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To:Security Team
From: Dave Posnett, Andy Hayward
Ce:
Date: 15/12/09
Subject: Horizon On-Line Cash Verification - Fraud Impact
As you are aware all branches in the network are migrating to
Horizon Online in the New Year (due to commence February
through to April 2010). The business has also determined
that cash verifications should be conducted at all branches
(except Crowns), and as such this will be a primary focus for
many sections and individuals in the coming months.
The Security Team are involved in the migration on various
fronts, but a key area remains the cash verifications. It is
on this particular point that this update seeks to clarify
and where required provide support in assisting with fraud
cases that materialise. The following details the potential
impact of fraud and what this could mean for each Strand and
individual within the Security Team.
Appendix 1 at the end of this report is primarily for the
Fraud Strand and details the criteria for raising a fraud
case.
Appendix 2 is a spreadsheet designed to enable Investigators
to consider the support available and factor resource into
their enquiries. This spreadsheet details contact numbers
and support levels, with some details missing that need to be
addressed (postcodes and level of support [Officer Status]).
Action All: Review Appendix 2 and provide missing details and
Capability levels.
Pilot Cash Verifications completed:
On the 11t* and 12t8 November, 150 cash verifications were
completed in order to test the impact on the Network Audit,
Contracts and Security Teams in readiness for live migration.
These visits were unannounced, random (as opposed to risk
©
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based), and involved a mixture of branch types and sizes.
e Planned visits: 150 (combination of 1, 2
or 3 persons attending)
e Visits conducted: 146 (109 Centrally
Supported/37 Multiple/BDMs)
e Escalated to Tier 2 Audit: 12 (£1k loss trigger)
e Suspensions: 5 (all in Centrally
Supported branches)
e Fraud cases: 2 (Springbank Rd £11k
Alloway £19k)
Impact If Replicated
Whilst not an exact science, it is possible to use the above
figures and estimate the volume of fraud cases at live
migration. One key difference at live migration will be the
fact that branches are to be ‘informed in advance’ when they
will be attended and that their cash will be checked.
e Circa 11,700 branches in the network
e Divide by 150 visits completed = 78
e 78 x 2 fraud cases (2 x per 150 visits) = 156 fraud
cases
e Reduce by 25% (due to branches being informed) = 117
fraud cases.
NB: the losses from the 2 fraud cases amounted to £30k. If
this was replicated across the network at live migration
(i.e. £30k x 78), the amount of losses would be £2.3m (or
£1.7m if the 25% reduction is factored in). Again however
with advance notice it is expected that a number of
shortfalls in branches will be ‘made good’ prior to the
migration visit.
Fraud Team Impact
Clearly, 117 fraud cases is a significant amount (if assessed
as accurate), though during migration (Feb to Apr), it would
reasonably be expected to raise a number of cases as normal
BAU:- 52 cases raised Feb to Apr in 2009, 42 of these due to
audit shortages carried out as BAU.
Consideration will need to be given regarding if and how the
Fraud Team can cope and manage. Contingency proposals are as
follows:
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e The 15 x Investigators only call (where possible) on non
investigation colleagues (from all Strands) to assist in
support officer capacity.
e Support officers assist with other elements of the
investigations e.g. tape transcripts, evidence
gathering, witness statements, committals, etc.
e 2 Fraud Team Leaders, 2 Financial Investigators and 4
Fraud Risk Managers are PACE trained and can undertake
enquiries.
e This increases the investigative resource by over 50%,
though allowances would need to be made in respect of
individuals BAU remits:
1. Team Leaders - less capacity to undertake line
management activities and other duties associated with
their roles.
2. Financial Investigators - less capacity to deal with
case files; resource reduction v probable increase in
case files v taking on criminal investigations.
3. Fraud Risk Managers - less capacity to deal as robustly
with current programmes, (notably low-risk programmes) .
Additional Mitigation:
e Individuals in other Strands are PACE trained and could
further alleviate pressures on the Fraud Team by
undertaking investigations (with similar allowances made
for BAU activities).
e Review current cases on hand (now/new year) and where
appropriate close non urgent or less priority, completed
cases. NB: there have been culls in recent years (ODR,
BAU, previous reorganisations). *Active case management
is currently ongoing with the expectation of a further
reduction by Feb 2010.
e * As at Dec09, fraud casework currently has 143 active
cases on hand: running approximately 75% of capacity
with the ability to take on an additional circa 40+
cases across the two teams.
e In preparation for HOL migration, audit team activity
will be minimal in December and January, further
resulting in reduced fraud case files being raised.
e Triggers and timescales to be confirmed as agreed (see
Appendix 1) - in a similar way that Audit/Contracts have
a trigger for involvement/suspension.
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e Cases to be ‘stacked and packed’ - there may be delays
in that cases take longer to investigate, but dealt with
in a priority order and as and when basis.
e Assistance from elsewhere within RMG or externally could
be necessary if the volume of losses is higher and/or
expectations materialise re investigations.
In summary and taking in to account the above comments and
potential for approx. 117 cases materialising from HOL
migration, there is an initial expectation for the fraud team
to directly manage and absorb the majority: circa 90-100
cases (40+ x expected spare capacity / 52 x expected BAU
activity), with the surplus cases being managed via
additional activity and support noted above. The main risk to
this is the small 3-month time-scale for migration, combined
with natural elements (i.e. geographical, s/leave).
The network wide cash verification is the first of its kind
and it is difficult to establish exactly what the impact
might be. *Important to note is the cash check will be ‘bulk
cash’ only and not include ATM cash verification (although
branches will be informed that all cash & ATM will be
checked). The above proposals will mitigate the worst case
scenario and enable the Fraud Strand (through assistance from
colleagues in other Strands) to manage any potential fallout.
Your assistance is therefore greatly appreciated and ticks a
significant box in ‘working with others to win’.
Next Steps / Actions:
Action All Strands: Review Appendix 2 and provide missing
details and confirm Capability levels of individuals to Dave
Posnett by 21/12
Action Fraud Team Leaders: Review current cases on hand, with
reduction of live cases prior to full migration: Feb 10’
(currently ongoing)
Action Fraud Team: Reduce outstanding a/l and TOIL in
readiness for full resource capability at migration
(currently ongoing)
Action Fraud/ Contracts Teams: Periodic monitoring and review
‘suspensions/casework raised’ activity during migration, to
identify emerging trends/hotspots and decision making
processes. (Weekly/monthly c-calls).
Action Crime Risk/P&BA/Cash Inventory: Confirm monitoring of
M.I. at branches pre and post migration to identify potential
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fraud risk activity (ongoing and agreed ‘Cash Tracking,
stock-adjusts, rem-reversals).
Action Crime Risk/P&BA: Although ATM not intended to be
checked, provision will be made to supply details of High
Risk Cash & ATM holding branches to the audit intervention
team.
Network activity: January 2010:
04/01: 12 x branches to be migrated
18/01: 260 x branches to be migrated
25/01: Stakeholder meeting (tbc)
08/02: circa 1000 x branches to be migrated
25/02: Full branch migration rollout
Fraud Strand
December 09
Appendix 1 - Triggers/Criteria for Raising Fraud Cases
Criteria Case Rationale
Raise
*Loss of any No *The minimum criteria for case
amount raise is that
*No suspension a Sub postmaster must be
suspended.
*Contract Managers are best placed
to consider
all circumstances and make this
decision.
*Burden of proof (Contract); no
suspension if ‘balance of
probability’ cannot be proven.
*Burden of proof (Fraud); if no
suspension, then it’s very
unlikely that ‘beyond reasonable
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doubt’ will be proven.
*Loss <£1k No * Represents Low risk to the
*Suspension business - cost of pursuing would
significantly outweigh the loss.
*It would not be in the public
interest to investigate or
prosecute such a low risk loss.
*It would not be in the business
interest to investigate or
prosecute such a low risk loss.
°90% of cases raised YTD are
audits, with average loss of £17k.
No losses <£1k have been raised.
*Loss £1k to Possibly: I ‘Represents Medium risk to the
£5k (to be business, though all circumstances
*Suspension discussed I should be considered.
with *The loss should be unexplained
Contracts I (e.g. no pending TCs, centrally
team) held debt, or other known
factors).
*Liaise with Stakeholders (Audits
& Contracts Managers).
*90% of cases raised YTD are
audits, with average loss of £17k.
Only 5 losses <£5k have been
raised.
*Loss >£5k Yes *Represents High risk to the
*Suspension business, though all circumstances
should be considered.
*Bulk of loss should be
unexplained (e.g. no pending TCs,
centrally held debt, other known
factors).
*Liaise with Stakeholders (Audits
& Contracts Managers).
°90% of cases raised YTD are
audits, with average loss of £17k.
73 losses >£5k have been raised.
NB: This is a guide only, as each loss will need to be
assessed on its own merits and include other factors (e.g.
admissions, resource, timescales, Modus Operandi, etc).
Appendix 2 - Security Team Support
The following spreadsheet details members of the Security
Team (by Strand)
The definition of Officer Status is as follows:
e 1st Officer - has training and experience
of leading a criminal investigation
interviews,
legislation).
e 2.4 Officer - has training and experience
evidence gathering,
and their postcodes and contact numbers.
(maybe dated)
(including
and relevant
(maybe dated)
of supporting a taped interview and/or searches of
persons,
vehicles, property.
e 34 Officer - has received search awareness training and
as well as other ad hoc
can support in searches only,
duties as directed by the 1S* Officer.
Firstname I Surname Strand Postcode Telephone Officer status
John Scott i “GRO GRO.
Firstname I Surname Postcode Telephone Officer status
John Bigley I ° LT 41st, 2nd, 3rd,
Paul Fielding 30
Richard Griffin 30
Kevin Patnell 30
Andrew Scott 30
Ged Harbinson ist, 2nd, 3rd,
Firstname I Surname Strand Officer status
Nigel Viles Commercial
Serpil Fischer Commercial G RO
Tony Newman _I Commercial :
Firstname I Surname Strand Postcode Telephone Officer status
Dave Pardoe ! eee“ I Ast, 2nd, 3rd,
Bob Brown 30
Lesley Frankland 30
Allison Drake 30
Nikki Dummett ! 2nd, 3%
Richie Graham H 3°
Wayne Griffiths G RO i 30
Bill McClarin I 3
Peter Mitchell 30
Brendan Palmer i 30
Sheila Prime i 30
Gordon Grant
David Bywater i
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Appendix 2 (Continued)
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Firstname I Surname Strand Postcode Telephone Officer status
Sue Lowther LS.
Dave King Ls.
Alan Simpson LS.
Firstname I Surname Strand Postcode Telephone Officer status
lain Murphy { I
Jonathan Bissett 3rd
Joanne Hancock
Helen Rose 4st, 2nd, 3rd,
Mark Dinsdale
Jane Owen
Chris Thorpe
Bhaven Karavadra
Firstname I Surname Strand Postcode Telephone Officer status
Andy Hayward - : 2nd, 3rd,
Lisa Allen I 4st, 2nd, 3rd,
Natasha Bernard ist, 2nd, 3rd,
Steve Bradshaw 4st, 2nd, 3rd,
Graham Brander 1st, 2nd, 3rd,
Jason Collins ist, 2nd, 3rd,
Robert Daily 1st, 2nd, 3rd,
Helen Dickinson ist, 2nd, 3rd,
John Longman i i 4st, 2nd, 3rd,
Andrew Daley i } 1st, 2nd, 3rd,
Adrian Morris iii 4st, 2nd, 3rd,
Dave Posnett i I 4st, 2nd, 3rd,
Colin Price H GRO a GRO 1st, 2nd, 3rd,
Gary Thomas i iit ist, 2nd, 3rd,
Paul Whitaker iit ist, 2nd, 3rd,
Mike Wilcox iii ist, 2nd, 3rd,
Suzanne Winter ae 1st, 2nd, 3rd,
Chris Knight an 4st, 2nd, 3rd,
Sharron Jennings fi 1st, 2nd, 3rd,
Lester Chine raud I ist, 2nd, 3rd,
Dave Posnett ist, 2nd, 3rd,
Kim Abbotts. ist, 2nd, 3rd,
Graham Ward Ast, 2nd, 3rd,
Paul Southin Lnceeceesenesnsnis ist, 2nd, 3rd,