Camargue’s Commercial Crime policy provides cover for employee dishonesty, fraud, computer crime and extortion. Claims arising from fraud have led to large financial losses for companies. According to Occupational Fraud 2022: A Report To The Nations by the Association of Certified Fraud Examiners, the average loss due to occupational fraud in 2022 was approximately R6.5 million, with 429 cases reported in the Sub-Saharan Africa region.

SAPS’ first quarter 2023 crime statistics reflect a 10.1% increase in commercial crimes from the 2022 comparative period. This amounts to 28,000 commercial crimes in the current period! Given South Africa’s high inequality and burgeoning unemployment rates, it is to be expected that commercial crimes will continue to rise.

Inherently, fraud is an operational risk that affects all organizations. As such, a commercial crime insurance policy can be used as an effective risk management transfer mechanism. Occupational fraud can be classified into three categories: corruption, asset misappropriation and financial statement fraud.

Lifestyle audits

The process of a lifestyle audit has three tests and can assist in identifying individuals whose lifestyles are disproportionate to their financial means or are involved in unethical business practices. It includes a lifestyle review, lifestyle investigation and lifestyle audit. The audits are conducted by professional auditors who will quantify an employee’s income and expenses to determine a person’s standard of living. It is thus a critical tool that mitigate risks relating to fraud and corruption.

A lifestyle audit contemplates a person’s financial profile. It includes information regarding property ownership and information available from the Companies and Intellectual Property Commission (CIPC) to ascertain financial interests and directorships. A lifestyle style review considers consolidated reports of an employee’s information that can be found in internal databases of the department such as e-Disclosure systems and the Central Supplier Database. Whenever irregularities are found in lifestyle reviews, these can trigger lifestyle investigations. The aim of these investigations is to collect evidence to prove allegations of undeclared income and whether a person is living beyond their means. As corroborated by Michael Barker of Crime Risk Advisory, lifestyles audits do not necessarily always identify problems but may provide indications that investigations are required, particularly since fraudsters tend to spend the money quite quickly..

Lifestyle audits assist in determining whether an individual’s asset have been acquired by fraudulent means, at the expense of a business. Consider employees within a procurement department – there are risks of collusion with suppliers by way of bid submission, creating fictitious vendors, falsifying invoices or accepting kickbacks. These are just some avenues for employees to personally financially benefit at the disadvantage of the employer.

Currently, lifestyle audits are compulsory for all national and provincial departments. It is reported that SARS conducted and finalised 25 lifestyle audits in 2022, identifying R474 million in tax debts.

Companies may be deterred in conducting lifestyle audits due to their complexity, cost, and the potential of encroaching on a person’s privacy rights. Michael Barker notes that not all companies appreciate the importance of lifestyle audits, particularly in need for such in procurement departments. Furthermore, audits are often met with resistance from management and staff.


It is imperative that companies conduct lifestyle audits lawfully and responsibly, considering the constitutional right to privacy granted by the Protection of Personal Information Act (POPIA) of 2013 which regulates the processing of personal information, ensuring it is done in a lawful manner.

Section 11(a)(f) of POPIA may create an avenue for entities to conduct lifestyle audits, as it permits the processing of personal information if necessary for pursuing the legitimate interests of the responsible party or of a third party to whom the information is supplied. Whilst legitimate interests aren’t expressly defined, an employer’s interest can be considered “legitimate” in the event that they are preventing and detecting fraud. In contrast, a person can object in terms of section 11(3)(a), on reasonable grounds relating to their situation. A means of acquiring consent would be through inclusion of such in employment contracts where employees “voluntarily, specifically and unconditionally consent to the organisation processing their personal information, as defined in POPIA, including specifically processing for purposes of conducting lifestyle audits”.


Underwriter’s considerations

Whilst lifestyle audits are not a substitute for comprehensive background checks (which should include employment history, criminal and credit checks) for prospective employees, it can act as risk management practice for potential fraud detection. Insufficient internal controls with respect to payroll, accounts and finance departments heighten the risk of fraud. Implementing lifestyle audits as a risk management tool may alleviate underwriters’ concerns, as it demonstrates a proactive approach in preventing fraud and employee dishonesty risks. In addition, it could allow for meaningful discussions regarding policy coverage and pricing.

Given the local landscape, it is imperative that appropriate risk measures are implemented to proactively manage the risk of fraud and employee dishonesty, of which lifestyle audits are just one of the many risk management tools available to companies. A laissez-faire approach to this very real risk will inevitably result in financial loss.



Report: Occupational Fraud 2022: A Report to the Nations

SAPS Crime Stats: police recorded crime statistics – republic of south africa

SARS Lifestyle Audit: SARS to collect R500m from just 25 lifestyle audits | Business

Guide to implement lifestyle audits in public sector: Guide to implement lifestyle audits in the Public Service

Compulsory lifestyle audits in government: Lifestyle audits now mandatory for all national, provincial depts – Corruption Watch

Consideration of POPIA in lifestyle audits: STEVEN POWELL AND ADRIAN ROUX: Lifestyle audits an invaluable tool in the fight against corruption

Lifestyle audits in South Africa: