Are Your Employees Ripping You Off?

Employee fraud occurs even in the most close knit companies, and it’s often very difficult to detect.

More than 85 percent of employees committing fraud have never been previously charged for or convicted of fraud-related offenses, and perpetrators of fraud often exhibit warning signs of their activity. The number one red flag is an employee who is living beyond his or her means. [1]

Understanding the characteristics of persons most likely to commit fraud can help you in your efforts to deter or prevent it. Here are some telltale signs that your employees might be up to something.

Corporate warning signs

Past employment issues may be an indicator of employees who are more likely to commit fraud, although only seven percent of perpetrators have been previously convicted of any criminal acts.

The highest frequency of fraud, more than 80 percent [2], occurs in these departments. Types of fraud vary within each:

  • Accounting
  • Primary Operations
  • Sales
  • Customer Service
  • Purchasing
  • Executive or Upper Management

As employees move into higher positions of trust and responsibility, they tend to develop a better understanding of the internal procedures of the company, which can contribute to an employee’s ability to evade internal controls against fraud.

Nearly 50 percent of employees who commit fraud have been with the company more than five years, and as tenure increases, so does the amount of loss to fraud – an average of more than $200, 000. [2]

While it’s important to maintain a high-level of trust with your staff, be careful not to turn a blind eye to suspicious activity from any employee.

Behavioral warning signs

Employees who commit fraud often exhibit behaviors or characteristics that might raise warning flags for co-workers and managers. These actions alone don’t mean that an employee is committing or will commit fraud, but they can be a strong indicator that something is wrong.

  • Living beyond means
  • Financial difficulties
  • Control issues, unwilling to share duties
  • Unusually close association with vendors/customers
  • Wheeler-dealer attitude
  • Divorce or family problems
  • Irritable, suspicious or defensive
  • Addiction problems
  • Refusal to take vacations
  • Past employment-related problems
  • Complaints about inadequate pay
  • Excessive pressure from within the organization
  • Past legal problems
  • Instability in life circumstances
  • Excessive family/peer pressure to be successful
  • Complaints about lack of authority[2]

Steps to take to prevent fraud

Visibility into your company’s spending can go a long way in preventing fraud. With an automated expense management system you can put more controls in place, keep a close eye on your money at all times and get a better understanding of exactly where your company’s funds are going.

Look for an expense management company that offers you the latest technology, such as mobile apps that allow you to take photos of receipts and immediately load them into expense reports, or pre-loaded spending cards that allow you to pre-determine how much your employees are allowed to spend.

[1] Association of Certified Fraud Examiners, 2010 Report to the Nations on Occupational Fraud and Abuse.

[2] Ibid., Victim Organizations and Perpetrators.


Ten Tips to Help You Control Employee Spending
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