Common Types of Employee Fraud for Companies to Watch For

Common Types of Employee Fraud for Companies to Watch ForEmployee crime is one of the leading causes of company loss each year. At a staggering 5 percent average loss, it is imperative that employee fraud is recognized and prevented. While a Commercial Crime Insurance Program will benefit a company in the event of a case, the following common fraudulent activity types should be recognized in order to prevent a variety of scams.

Monetary Theft- While the typical scheme involves stealing cash from the company, more sophisticated activity involves fraudulent disbursements, setting up fake vendors and invoices, and misreporting of records, according to Feeley & Driscoll, P.C.

In order to combat these risks, sound internal controls are required. Frequent audits and monitoring of cash flow can help to minimize loss. Lastly, multiple people should be involved in the cash handling duties. For example, separate employees should be required to intake money, count, and deposit it to ensure multiple checks and balances. This way, any suspicious activity is more likely to be recognized.

Physical Theft- High-value inventory should be heavily monitored and restricted whenever possible. In addition, maintaining manageable inventory levels can help to reduce shrinkage and loss of business. During busy times, regular inventory checks should be completed while ensuring no unusual trends occur, which could imply theft.

Workers’ Comp Fraud- This type of fraud can be incredibly costly for an employer. While the incident should be immediately investigated, identify any witnesses who saw the accident. If there are none, this can be cause for suspicion. In addition, claims that take place before an anticipated lay off or strike should also be closely inspected. Another sign of a fraudulent claim is a lack of specific details about the injury and if the employee constantly delays doctor appointments and procedures.

To deter against this type of theft, strict regulations should be put in place and employers should educate employees on the proper ways in which a workers comp injury will be managed. Further, hiring a professional forensic investigation team may work to a company’s benefit to identity suspicious behavior and potential risk exposures.

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