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The Face of Fraud

November 30, 2017
The Face of Fraud Article by SDCCPA

Crime tends to require three elements: motive, desire and opportunity. Employee theft is no different. Being aware of the reasons leading up to employee theft and learning to identify likely perpetrators can give employers a leg up on protecting their companies from theft.

Motive & Desire

Employees who steal usually have their motives. For example, Tom has been with the company for three years and is still making the same salary. He feels underpaid and undervalued. Becky just missed getting a promotion that would have meant more prestige and a higher salary. Both employees feel they deserve more. They now have the motivation to take something for themselves. Desire builds on motive. Letting negative emotions build and imagining the satisfaction of taking revenge on the company, reinforces employees to do just that. But, the theft can only occur when and where there is opportunity. Inadequate policies, lack of attention from management and deficient internal controls provide potential opportunities for discontented employees seeking to “even the score”.

[easy-tweet tweet=”Adequate prevention policies can severely reduce your risk of employee fraud.” via=”no” hashtags=”sdccpallc, EmployeeFraud”]

The “High-Risk” Employee

Identifying employees who may be more likely to steal starts with the hiring process. Statistics show most employees who steal are first-time perpetrators. Background checks though can alert potential employers to individuals with a pattern of employee theft in prior jobs. After an employee is hired, employers can restrict the jobs employees perform and the access they have to monies.

Potential high-risk employees may exhibit the following behaviors:

Breaking Rules – A 2016 Association of Certified Fraud Examiners study indicated 40% of employees who stole had previous non-fraud workplace violations, including excess absenteeism and tardiness, excess internet browsing and other inappropriate work behaviors.

Bullying, Controlling & Acting Suspicious– employees who intimidate others, refuse to take a vacation and/or continually work overtime, may be hiding something.

Complaining about Feeling Wronged – the individuals may steal as a way of taking what they feel they

Addictions –employees with substance or gambling addictions are often more likely to steal for financial reasons in order to satisfy cravings.

Living Beyond Their Means – this can indicate monies are being stolen from the company.

Lying and Defensive – stealing and lying often go hand in hand.

Close Relationship with a Vendor – indicates the potential for collusion.

Financial Difficulties, Legal Issues, Family Problems, Educational Changes – instability or significant changes outside of work can lead to varying financial and emotional stresses that can impact theft.

[easy-tweet tweet=”Can you identify the 11 indicators of a ‘High-Risk’ employee? Learn them here and protect your company.” via=”no” hashtags=”sdccpallc, fraud”]

The Statistics

Being able to identify risky behaviors is a good start. Knowing some employee theft stats can also help employers be aware of some of the patterns as to employee theft. The statistics are taken from the Association of Certified Fraud Examiners 2016 Global Study.

  • 76% of employee thefts occur in 7 key departments: accounting, operation, sales, executive/upper management, customer service, purchasing and finance.
  • 69% of employees who steal are male, causing median losses of $187,000
  • 31% of employees who steal are female, causing median losses of $100,000
  • 55% of employees who steal are 31 to 45 years old
  • Only 18.9% of theft is committed by owners or executives
  • 52.9% of cases involved multiple perpetrators working in collusion
  • 91% of cases involved the employee displaying at least one behavioral “red flag” (as listed above) prior to detection.

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