Employee fraud – how to tell if your employees are embezzling

Employee fraud – how to tell if your employees are embezzling

Fraud is a secretive and unpredictable behaviour that no-one could predict right?

Well, it may surprise you to find out that there are some recognised warning signs that employees are dipping their hands in your till and being able to spot them might save your business.

Now we’re not saying that everyone displaying one or two of these signs is committing a criminal act, after all, some of these behaviours are simply those of diligent and committed employees but if you have one employee that shows many of these signs then you may want to look a bit deeper.

The first and most obvious sign of fraud is the employee who displays wealth beyond their means. They may buy expensive cars, go on exotic holidays or wear a very nice Rolex into work.

It is always a surprise to business owner fraud victims that the perpetrator was so brazen about displaying the signs of their ill-gotten gains, but actually, people do this even though it seems like stupidity.

When questioned the perpetrator may seek to allay suspicion by using a creative excuse such as a sudden windfall, an inheritance or selling off some assets that turned out to be worth a lot more than they thought.

If you have a member of staff who has a sudden influx of valuable possessions then you may wish to investigate further.

The second sign is the diligent, ever-present worker.

Employers may think themselves lucky to have such a dedicated member of staff but beware, fraudsters can often feel the need to be in the office at all times to protect their secret and avoid anyone looking too hard.

If you have someone who works excessively long hours, rarely takes holiday or refuses promotions or transfers then you should think about the reasons for their behaviour.

Alongside being ever-present, the deceptive employee may also refuse to delegate or share work. They hoard jobs like a squirrel hiding acorns and any attempt to get them to involve other people is usually met with defensive behaviour.

They may use excuses for not delegating or sharing that may range from entirely plausible to the totally illogical. It is true to say that this behaviour can also be a sign of someone who feels under threat so care needs to be taken not to upset a normally excellent worker unjustly.

Defensive behaviour when questioned is also a sign of a guilty conscience. Staff that either refuse to co-operate or immediately hit out may, in fact, be trying to divert attention from an uncomfortable line of questioning. Don’t be put off by shouting, evasion or even tears. Stick to your guns and make sure you get a clear answer to that question.

If you find an excessively large number of transactions with little or no backup paperwork then ask yourself if this is entirely correct. Don’t rely on the auditors to pick these signs up, they can only check a sample of the many transactions that go through your company. Instead, make sure you have excellent business controls in place.

One of the key drivers in fraudulent activity is the existence of addictive behaviour.

If your employee seems to have a problem with alcohol or drugs then it is a fair bet that they will have trouble financing their addiction.

Look for erratic behaviour, especially where the person concerned frequently misses deadlines and appointment s with little explanation or appears distracted and withdrawn.

In smaller firms where the hiring policy is in the hands of managers rather than a recruitment department, employers should look for signs of nepotism. Are a number of members of the same family working in one department for a relative who is their manager? Does a manager continue to employ only friends and relatives?

Similarly, a manager who refuses to use a range of suppliers even when they may be cheaper or better should raise a warning flag. Fraudsters will often use a tame supplier who will provide kickbacks for the custom and have also been known to set up bogus companies to channel money for fictitious work or supplies.

It is important that employers are always on the lookout for fraud. Even though external fraud gets most of the headlines, in fact, the majority of crime that is perpetrated upon businesses comes courtesy of the firms’ staff and managers.

Confronting an employee based on one or two of the above signs is a bad move, instead, firms should keep a weather eye and ensure they have clear and irrefutable evidence of fraud before making any allegations.

Businesses that are alert to the danger signs of employee fraud are much more likely to be able to spot and stop criminal activity before it becomes a serious threat to the existence of the business.


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