Barings, yesterday said that companies in Bermuda have to be more vigilant about fraud on their own doorstep.

David Sherwin, a partner in Ernst & Young in London, issued the warning while speaking to The Royal Gazette while on a routine visit to the company's offices in Hamilton.

He said that in general companies did not realise that most frauds -- 82 percent -- are committed in-house by employees.

"It is not that Bermuda necessarily has a problem, but all companies face this. What we are trying to do is we are giving management a wake up call. And we have to make sure that if something comes to light to follow it up and not have it swept under the carpet.'' Mr. Sherwin heads up the accountancy firms's international fraud investigation group and has not only investigated the Barings scandal, but also dealt with the problems at Morgan Grenville Asset Manager and the irregularities at Codelco, the scandal over Chilean coppers futures.

He said: "Those are all in the public domain, so I can speak about them, but there are many, many more, which are kept out of the public eye. Sometimes I am asked what similar cases I have worked on before, and I cannot tell them.

It may have been a problem in a rival company who would not want the matter disclosed.'' Mr. Sherwin and John McKenna, a partner at Ernst & Young in Bermuda, said that many managers were worried about the hazards of computer hackers without worrying about what was going on in their own offices and leaving themselves open to fraud.

Mr. McKenna said: "Management need to think about things -- when they are thinking about making a million dollars profit next year, they also have to think about how to stop a million dollars fraud in their company.'' Mr. Sherwin said that companies going through change were particularly vulnerable to fraud as change put stress on systems in place.

"For instance, companies that get rid of six managers because they did not do anything, suddenly realise that they did actually do something. This is very common.'' A survey carried out by Ernst & Young over 15 countries found that more than half of the 739 respondents thought their companies could do more to protect their organisations from fraud.

Out of those companies 60 percent suffered a fraud in the last year. Ten percent suffered more than 50 incidents -- and almost half of those companies were banking or financial services organisations.

According to Mr. Sherwin, apathy continues to be at the heart of the fraud prevention programme.

Picture: Page 28 Fraud expert sends out warning A third of the respondents said they believe they do not do enough to protect their organisations from fraud and half said they could do more in this department.

Out of the 82 percent of employees who committed the fraud, a third were in management positions. Nearly half of those fraudulent employees had been with the organisation for more than five years and almost a quarter for more than ten years.

"Many of the companies say, oh, Fred's been with the company for ten years and has never been on holiday. It couldn't be him. But sometimes they have not been on holiday because they couldn't afford to be on holiday.'' The survey revealed that only 38 percent of the perpetrators who committed the worst fraud suffered by each organisation in the last 12 months were prosecuted and 28 percent were dismissed, indicating that a third went unpunished.

Mr. Sherwin said that sometimes adverse publicity in a trial sometimes puts companies off prosecuting the case. Mr. McKenna said: "Companies need to look at their systems and look to see if they have the requisite controls in place and check also to see if they are enforced.'' He added that very few frauds came to light because of checks in place, but were either stumbled upon or because of one of their colleagues had blown the whistle.

Mr. McKenna said: "There needs to be the right procedures in place so that employees know about any kind of hotline or way of telling about things like this.'' Bermuda was not one of the 15 countries surveyed, but according to Mr.

Sherwin, there is no reason to believe that it is not happening here with the same regularity.

"If someone stole $250,000 from your company, the damage that could be done is a multiple of it. There is one business who suffered a fraud and a $10 million contract was pulled as a result of it.'' Copies of the report can be obtained from Ernst & Young at 3 Reid Street, Hamilton.