Thursday, January 12, 2017


If you think embezzlement is only something that happens at large corporations — where one bad egg out of hundreds of employees can escape with cash unnoticed — think again. Occupational fraud, or the misuse of an organization’s resources by someone within the organization, is a threat to companies and nonprofits both big and small.
But fraud isn’t something that happens overnight. On average, fraudsters can get away with their crimes up to 18 months before they’re detected, according to the Association of Certified Fraud Examiners’ (ACFE) 2014 fraud report. That same report showed that employees in certain positions are more likely to commit fraud than others. Executives committed fraud in 19 percent of cases studied, followed by managers (36 percent) and employees (42 percent).
Fraud and embezzlement is something no organization wants to be a victim of, but it doesn’t give employers cause to distrust or micromanage employees. It’s important to note that embezzlement is the product of a pattern of behaviors. In the ACFE’s report, 92 percent of fraudsters in cases studied exhibited behavioral warning signs before being detected. So before you launch a full-scale witch hunt for potential fraudsters, watch for the subtle behavioral warning signs of embezzlement in your organization.

The Behavioral Warning Signs of Embezzlement

  1. Changes in Lifestyle: Extravagant Spending or Excessive Debt – As someone who is in charge of keeping an organization afloat, watch for income-related changes in behavior. Employees who suddenly live outside their means, with expensive cars or possessions, might be cause for concern. On the reverse end of that, employees who express financial hardships — due to debt, divorce, or gambling — are also red flags.
  1. Unexplainable Workaholics: No Time-Off Requests or Late Nights at the Office – If an employee is embezzling, he or she will likely go to great lengths to hide it. This includes refusing to take time off or insisting on working late into the night, after others have gone home. These fraudsters are keeping a close eye on their activities and don’t want other employees or managers to see documents that might expose them.
  1. Persistent and Inexplicable Dissatisfaction: Hostility Towards Managers or Other Employees – Not wanting others to get involved in their dealings, fraudsters might act secretive or suspicious around managers or other employees. In these cases, fraudsters are likely feeling the heat from those who might find them out. This is further exemplified by the fact that many occupational fraudsters — 82 percent surveyed by the ACFE — are first-time offenders.
In any case, these behavioral signs aren’t mutually exclusive with fraud and embezzlement. And sometimes, the best way to get to the bottom of odd behavior is to simply and respectfully ask employees if something has changed in their life or work that’s affected their behavior. According to the ACFE, other alternatives, like background checks, aren’t always the best ways to detect fraud.
“While background checks can be useful in screening out some bad applicants, they might not do a good job of predicting fraudulent behavior,” states the ACFE’s report. “Most fraudsters work for their employers for years before they begin to steal, so ongoing employee monitoring and an understanding of the risk factors and warning signs of fraud are much more likely to identify fraud than pre-employment screening.”

Accounting Software: Your Most Reliable Fraud Detector

If you suspect someone in your organization might be committing fraud, consult your accounting software. Up-to-date software that manages audit trails and transactions will better exhibit more concrete evidence of foul play.

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