Workplace fraud, also called employee fraud or employee theft, unfairly deprives a company of hard-earned assets, including money, time, intellectual property, and even the company’s reputation. Keep reading to learn about the different types of workplace fraud and what you can do to prevent it.

What is Workplace Fraud?

Workplace fraud takes many forms and includes everything from a server slipping a few jam packets into their pocket during their shift at the diner to sophisticated multinational embezzlement schemes. Key types of workplace fraud are:

• Misappropriation of Assets. This can be as straightforward as stealing cash or inventory, but it also includes using company resources for personal use. Using the company Xerox machine to make copies of your resume or running personal errands in the company car are two common examples. Asset misappropriation can go from these minor transgressions all the way up to selling trade secrets, creating “ghost” employees to collect their wages, and running a retail arbitrage ring using company inventory.
• Corruption & Collusion. A corrupt employee seeks out ways to use company resources for their own gain, often leveraging their own autonomy or decision-making authority for this purpose. Common examples of corruption or collusion are:
  • Getting kickbacks from suppliers for preferential treatment.
  • Falsifying sales records for inventory never delivered or services never performed and then collecting the commission.
  • Authorizing payments to a vendor that doesn’t exist or a vendor working in collusion with the employee.
  • Corporate espionage.
  • Operating a competing business using the company’s assets, intellectual property, or trade secrets.
  • Selling confidential company or customer data or using such data for non-business purposes.
• Financial & Tax Fraud. Sometimes referred to as “cooking the books,” financial and tax fraud can be tempting for anyone who has authority over the company’s accounting system or financial records. This type of fraud can include:
  • Overvaluing or undervaluing company assets for tax purposes.
  • Cheque forgery or cheque tampering.
  • Altering financial statements to put the company in a better position to qualify for loans or government incentives.
• Insurance & Benefits Fraud. It’s surprisingly common for employees to invent or embellish facts in order to commit this type of fraud. Some examples are:
  • Falsifying invoices for benefits claims.
  • Claiming workplace compensation for non-existent injuries or injuries that did not occur in the workplace
  • Remaining on long-term disability when they are healthy enough to return to work.
  • Colluding with a service provider to overbill for treatments.
  • False WSIB claims

Detecting and Preventing Employee Fraud

The prevalence of fraudulent workplace behaviours should be concerning to employers and business owners. However, employers are not helpless when it comes to preventing these schemes. Here are some key practices that every company should engage in to minimize employee fraud:

• Stay up to date on the types of fraud that are out there. You may be surprised to learn how creative people can be when they stand to gain from wrongdoing. Shore up your business’s defenses by reading, researching, and consulting with experts in the field.
• Watch out for unusual employee behaviours such as conspicuous spending or expensive new habits. Pay attention to reasons why someone might need money: a gambling or drug habit or a pending divorce are some common reasons. Other suspicious behaviour might include getting to work earlier than everyone else or staying later, requesting increased responsibilities with no increase in pay, or asking for access to information or record-keeping systems for no apparent reason.
• Hire an accountant to audit your record-keeping systems and procedures. As a fresh set of eyes, they may spot opportunities for fraud you’ve overlooked. They can also recommend changes to your systems of checks and balances to make them more foolproof.
• Rotate employees through positions in your company and require them to take vacations long enough to expose any fraudulent practices they may have put in place.
• Conduct a professional risk management assessment.
• Do a thorough background check on potential new hires and any existing employees you suspect of wrongdoing.

Conclusion?

Many ways of preventing employee fraud are straightforward and can be done by the employer. However, some are better left to the professionals. 

Private Investigators are highly skilled at preventing and detecting many types of fraud and can conduct thorough security audits and extensive background checks. 

The expert corporate investigations team at Star Quality Private Investigations® has over two decades of experience protecting companies from employee fraud. With our sophisticated equipment and technology and a keen eye for spotting weaknesses in existing systems and procedures, we are your invaluable partner in reducing risk and rooting out corruption. 

Don’t wait until it’s too late! Put your risk management plan in place before your business suffers a significant loss. Call us today to talk about how we can help you and your business gain the peace of mind you need to focus on making your company as healthy and profitable as it can be.