Worried About Workplace Fraud? Pay Attention to These Employee Behaviors

Ralph Q. Summerford
President
July 29, 2020

Economic turmoil can serve as a powerful accelerant for employee fraud, pressuring cash-strapped companies to sacrifice compliance activities to save money and fueling financial insecurity and temptation among workers.

The current recession is no exception. A recent survey by the Association of Certified Fraud Examiners found that nearly 70 percent of its members were worried about an increase in fraud in the wake of the COVID-19 pandemic. A third of the members said they have already seen a spike in employee embezzlement cases, and four in 10 reported more instances of bribery and corruption.

To fight fraud, companies need to pay close attention to potential warning signs—particularly an employee’s behavior. As in poker, fraudsters have tells, and their behavior often follows similar patterns from workplace to workplace. While the mere presence of a certain type of behavior does not mean an employee is committing fraud, it does provide a cue to management to pay closer attention to prevent or halt a potential issue.

WORKPLACE ATTITUDES

Employers have repeatedly identified attitudes common among workplace fraudsters, including:

  • Unethical behavior. If a person is willing behave to dishonestly in other aspects of their life, it often follows that the same inclination exists at work. Is the office buzzing about a person’s unethical behavior outside the workplace? It’s worth paying close attention to that individual to ensure unethical behavior does not occur inside the company as well.
  • Constant dissatisfaction. An employee who routinely expresses dissatisfaction with his or her job may be more likely rationalize inappropriate actions against an employer.
  • Cutting corners. Employees who are habitually looking for ways around company policies and procedures may also attempt to beat the system for personal gain.
  • Hoarding information. A dishonest employee often shies away from sharing information or relinquishing control over a task. They may conceal fraud by ensuring key documents and data never leave their grasp.
  • The first one in and last one out. An employer might overlook an employee who comes in early, stays late, and never takes a vacation. But the employee may be looking for opportunities to be alone in the workplace. A number of frauds have been uncovered when “too-good-to-be-true” workers finally miss work and are unable to prevent incriminating evidence from coming to light.

 

PERSONAL PROBLEMS

Personal problems and habitual behavior are common red flags for employers. Employees with substance abuse issues, gambling habits, or who are clearly living beyond their means may be more susceptible to fraud. It’s critical for managers to trust their instincts: An employee who shows up in the parking lot with an $90,000 automobile when he earns $40,000 a year may be worth keeping an eye on.

Here are a few other key issues to consider:

  • Is an employee facing instability outside work? Financial pressures may be mounting because a spouse has lost a job. Or medical expenses for the employee or family member may be creating extraordinary pressure. Fraud is often driven by issues occurring in an employee’s family life.
  • Does the employee have legal problems? Legal issues often create financial pressures that may lead an individual to take desperate measures.
  • Is the employee involved in an infidelity? Cheating spouses may spend lavishly on luxuries and may find themselves in a predicament to make up a shortfall.

 

WHEN FRAUD IS UNCOVERED

If you suspect fraud in your workplace, you must have a plan of action in place to stop the activity immediately. Take the following steps:

  • Secure the Evidence. Gather and protect any evidence that could be helpful to your investigation teams, such as computers, flash drives, cell phones, and digital accounts. “Secure” is the operative word. Don’t tamper with the evidence. Instead, assemble a team of forensic experts to investigate as soon as you can.
  • Don’t Fire the Employee—Yet. When fraud is discovered, resist the temptation to terminate the employee. Employees have a duty to cooperate with employers during a lawful investigation. Until evidence has been gathered by investigators, consider keeping them on the payroll.
  • Do Restrict the Employee’s Access. To prevent them from covering their tracks or stealing proprietary information, restrict the employee’s access to the workplace and the company’s systems.
  • Call Your Insurer. As soon as possible, contact your insurer. Many policies have a 30- or 60-day notification provision, beginning from the first day that you discover a potential loss. Failing to notify an insurer may void your coverage.

AN OUNCE OF PREVENTION

Even if you do not currently suspect wrongdoing in your workplace, keeping a close eye on employee behavior can help you spot a potential problem and act quickly to protect your company.

A few other preventative measures can also help curb an employee’s temptation to commit a financial crime. Consider segregating duties, placing daily and monthly limits on company credit cards, and monitoring electronic audit trails. Check the backgrounds of new hires and avoid hiring those with a questionable past. If possible, rotate staff in financial areas, such as accounts receivable, cash management, or purchasing, where the temptations for bad behavior tend to multiply.

Taking these steps can help an employer ensure that no employee gains too much power or is able to keep secrets about segments of the business. They may take extra work but the payoff—protecting an enterprise from the devastating effects of fraud—is worth it.

Contact us to learn more about ways our team can help you fight and investigate fraud in the workplace.

 

CATEGORIZED UNDER: Fraud Examination