Learn How to Spot a Fraudster in your Office

Posted  August 11, 2014  by  Jenny Green

Think you could spot a fraudster in your office?

It’s not as easy as you think.

The typical ‘insider’ fraudster is an average employee, or possibly manager or owner, who has a clean employment history and no fraud-related problems with the law.

In fact, according to the Association of Certified Fraud Examiners’ (ACFE) 2014 Report to the Nations on Occupational Fraud & Abuse, only 5% of fraudsters had been convicted of a fraud-related offence prior to committing the crimes examined in the study.

The same report found that 77% of fraud in the workplace was committed by someone working in one of seven departments - accounting, operations, sales, executive/upper management, customer service, purchasing and finance.  Over half were aged between 31 and 45 and two thirds were men. 

Perhaps more interesting (and worrying) was the fact that more than half of those committing fraud against their employer had been employed by the victim organisation for six years or more. 

And the longer the tenure, the greater the cost of the fraud – perhaps because longer-serving staff are more trusted by colleagues and supervisors to get on with their job and so less likely to be closely monitored.  They might also have more in-depth knowledge of any anti-fraud measures, including gaps that could be open to exploitation. And, of course, people who’ve been with an organisation for a long time are likely to have worked their way up to a more senior position of authority.

But before you set the private detectives on to Bob in Accounts because he’s just celebrated his 31st birthday and got his 6 years of service congratulatory carriage clock, bear in mind that actually the biggest fraud alert signals are behaviours rather than physical attributes.

In most cases (92%) at least one common behavioural red flag was noticed before the fraud was actually picked up.  These sometime subtle but often tell-tale signs include:

  • Living beyond their means – so spending far more than they make
  • Financial difficulties – constant worrying about money
  • Unusually close with suppliers or customers
  • Control issues – micro-managing to the ‘nth’ degree
  • An unstable home life – including divorce or family problems
  • Suspicious or defensive behaviour in general
  • Problems with addiction – they may have gambling debts or drug/alcohol problems
  • Lots of untaken annual leave – perhaps wanting to stay close to the scene of the crime
  • Subject to pressure from family or peers to be seen as a success
  • Social isolation – not ‘gelling’ with the team and being seen as an outsider

So whilst background vetting and reference checks can help to weed out the more obviously ‘dodgy’ candidates, they are not always the best way of predicting and preventing employee fraud. Most fraudsters work for their employers for a number of years before straying into criminal actions, so ongoing monitoring and an understanding of fraud risk factors and warning signs are much more effective when it comes to prevention. 

An encouraging point raised by the ACFE report is that organisations with effective anti-fraud controls in place benefited from quicker detection and less costly frauds than those without. Business managers, supervisors and employees need to be trained to recognise the warning signs, as proactive measures - including management reviews, internal audits, employee monitoring procedures, and technology related security measures – were proven to be critical in catching frauds early and limiting financial losses.

The report notes that “the threat of likely detection is one of the most powerful factors in fraud prevention because it all but eliminates the fraudster’s perceived opportunity”.

In essence, if your employees know you’ve got robust measures in place to detect and prevent fraud, they are less likely to be tempted into trying it.  Might now be a good time to have a think about what anti-fraud measures you have in place in your organisation?

Access to confidential documents and data is one obvious area.  Here’s more information on implementing a data security plan to help get you started.

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