{"id":998,"date":"2021-07-15T06:18:50","date_gmt":"2021-07-15T06:18:50","guid":{"rendered":"https:\/\/crigroup.com\/?p=998"},"modified":"2024-01-23T14:49:57","modified_gmt":"2024-01-23T14:49:57","slug":"identify-and-prevent-employee-fraud","status":"publish","type":"post","link":"https:\/\/crigroup.com\/ar\/identify-and-prevent-employee-fraud\/","title":{"rendered":"How to Identify and Prevent Employee Fraud?"},"content":{"rendered":"<p><span data-preserver-spaces=\"true\">In 2017 the major European ABB conglomerate admitted that an\u00a0<\/span><a class=\"editor-rtfLink broken_link\" href=\"http:\/\/money.cnn.com\/2017\/03\/13\/investing\/abb-fraud-theft-south-korea-management-failures\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><span data-preserver-spaces=\"true\">employee took advantage of serious management failings to disappear with $103 million of the firm&#8217;s cash<\/span><\/a><span data-preserver-spaces=\"true\">. According to CNN business, ABB CEO Ulrich Spiesshofer and Chief Financial Officer Eric Elzvik admitted that the organizations managers had failed to maintain sufficient segregation of duties in the treasury unit of its subsidiary in South Korea and did not provide enough oversight of local treasury activities.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">To top it all off, ABB also failed to keep the signature seals of the South Korean unit secure which as a result, has lead the company became &#8220;bound to unauthorized financial contracts, resulting in undetected financial obligations.&#8221;\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Organizations rely on the honesty and integrity of their employees, however employee fraud does unfortunately cost companies vast sums of money. Employee fraud is a reality across all sectors &#8211; no matter how credible a job applicant is and how stringent your hiring process is &#8211; your business is at risk.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Tips on Identifying and Preventing Employee Fraud<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">When you trust your employees, it is difficult to think the worst of them, even when there are red flags \u2013 circumstances or patterns that are out of the ordinary \u2013 alerting you to the contrary. If you have suspicions of employee fraud, it is recommended to hire a forensic accountant to help you detect fraud, understand your circumstances, and put together evidence to target and confront the employee without tipping them off.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The good news is that you can plan and train your team to prevent this from taking place; the best thing you can do for your business is to learn how to recognise the warning signs of employee fraud and have robust procedures in place to minimise the risks and opportunities for fraud. Employee fraud covers a wide range of fraudulent activities in the workplace and can vary in seriousness including embezzlement.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Embezzlement involves an employee who transfers company funds into their bank account. One example of an act of embezzlement is deliberately writing cheques in the employees&#8217; name or diverting company assets without authorisation, e.g. customers unknowingly pay into an employee-controlled bank account, not the business&#8217;. This is serious fraudulent behaviour, but employees usually get away with it without raising any suspicion by creating non-existent suppliers and fake employees or using counterfeit credit notes to hide\/disguise misappropriated monies.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">An easy way to spot this type of financial fraud is to scour through the bank statements and financial records of your organisation and check for irregular activities or patterns of unusual and unauthorised transactions. <\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Another common sign of embezzlement is when either an employee or a manager\/director begins to enjoy a lavish lifestyle that is obviously beyond their means, e.g. holidays, cars, clothes\/jewellery. <\/span><span data-preserver-spaces=\"true\">In the case that<\/span><span data-preserver-spaces=\"true\">\u00a0you suspect an employee or director might be embezzling funds from within your company, it is essential to be discreet in your employee fraud investigation to prevent the employee from covering their tracks and disposing of substantial evidence.<\/span><\/p>\n<h3><span style=\"font-size: 20px;\" data-preserver-spaces=\"true\">Other Common Types of Employee Fraud<\/span><\/h3>\n<ul>\n<li><span data-preserver-spaces=\"true\">Commission fraud \u2013 inflating sales figures to gain a more significant commission than deserved.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Petty fraud \u2013 for example, embellishing an expense claim or taking office supplies.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Money laundering \u2013 hiding the origin of illegally obtained money and washing it through your business.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Insider Trading \u2013 making a profit by using valuable information that is unavailable to the public to their advantage, for example, confidential information that could impact the prices of shares, securities, goods\/commodities.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Manipulation of accounts \u2013 false information on sales, purchases or stock can be used to perpetrate fraud for personal financial gain, e.g. overstated trading profits to receive cash\/share bonuses, or get a promotion, creating false trading accounts or stock\/fixed asset write-offs to obtain goods.<\/span><\/li>\n<\/ul>\n<p><strong><span style=\"font-size: 20px;\" data-preserver-spaces=\"true\">What Can You Do (as an employer) to Minimize Employee Fraud?<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">The most effective way to minimize employee fraud as an employer is to implement robust management procedures and employee background screening; the implementation of these preventative measures will ensure staff are adequately investigated and monitored and consider the possibilities for collusion between employees &#8211; including a conflict of interest. Paying attention to only the procedures within your accounts department is not sufficient. The same procedures can help you across your operations, including sales and procurement.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Minimize the chances of employee fraud with the following procedures:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Separation of employee responsibilities such as placing orders, recording invoices and collecting debts.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Requiring purchase or payment authorization by more than one person.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Compare actual to budgeted expenditure for unexpected patterns.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Examine bank reconciliations thoroughly.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Scrutinize cancelled cheques and cheques made out to employees or unusual vendors.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Review supplier invoices for significant amounts, pricing or volumes.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Verify credit notes and write-offs with receiving records.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Install and monitor CCTV to deter theft of stock or equipment.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 20px;\"><strong><span data-preserver-spaces=\"true\">Fraud Triangle<\/span><\/strong><\/span><\/p>\n<p><span data-preserver-spaces=\"true\">An American criminologist, Donald R Cressey, devised a theory that involved three aspects that trigger fraud. Understanding these triggers will help you prevent fraud:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Opportunity \u2013 the lack of internal controls or reporting structure\/oversight increase the chance of fraud.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Rationalization \u2013 the fraudster will rationalize the continued deception, which increases slowly, perhaps over a few years, becoming an entitlement, i.e. I deserve this. This offers the chance to stop some employee fraud early if robust detection procedures are in place.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Pressure \u2013 overwhelming pressure, be it business factors such as company targets to meet or personal pressures, such as gambling or financial problems.<\/span><\/li>\n<\/ul>\n<h4><strong><span data-preserver-spaces=\"true\">Implement Pre-employment and Post-employment Employee Screening Now!<\/span><\/strong><\/h4>\n<p><span data-preserver-spaces=\"true\">Preventing financial loss is crucial for your business&#8217;s survival and expansion, which is why it&#8217;s essential to know and understand its obvious signs. Use the list above as a guide to protecting your organization.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">To detect employee fraud professionally and thoroughly, it is recommended you seek the expertise of a skilled employee fraud accountant as early as possible. They can help you investigate your employees by reviewing your bank statements and financial documents and advise you whether an employee is committing fraud and to what extent. A forensic accountant&#8217;s report will also give you the evidence you need to take the necessary action against your employee and act as a deterrent to others.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">For a Free and Confidential Chat to Discuss How We Can Help Your Business, <\/span><\/strong><a class=\"editor-rtfLink\" href=\"https:\/\/crigroup.com\/ar\/contact-us\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"><strong><span data-preserver-spaces=\"true\">contact us.<\/span><\/strong><\/a><strong><span data-preserver-spaces=\"true\">\u00a0<\/span><\/strong><\/p>\n<p>&nbsp;<\/p>","protected":false},"excerpt":{"rendered":"<p>In 2017 the major European ABB conglomerate admitted that an\u00a0employee took advantage of serious management failings to disappear with $103 million of the firm&#8217;s cash. According to CNN business, ABB CEO Ulrich Spiesshofer and Chief Financial Officer Eric Elzvik admitted that the organizations managers had failed to maintain sufficient segregation of duties in the treasury [&hellip;]<\/p>","protected":false},"author":1,"featured_media":9815,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15,24,12,13,146],"tags":[25],"class_list":["post-998","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-industries","category-all-regions","category-due-diligence","category-employee-background-check","category-resources","tag-fraud-prevention"],"gutentor_comment":0,"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v16.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<meta name=\"description\" content=\"Businesses rely on the honesty and integrity of their employees, but employee fraud is, unfortunately, not rare \u2013 and can cost companies vast sums of money.\u00a0\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/crigroup.com\/ar\/identify-and-prevent-employee-fraud\/\" \/>\n<meta property=\"og:locale\" content=\"ar_AR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Identify and Prevent Employee Fraud? 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