Safeguarding Your Workplace: Strategies to Prevent Theft and Fraud.
In today’s hyperconnected world, safeguarding your business from pervasive workplace theft and fraud is inevitable, and demands a multifaceted approach. Enterprises are increasingly grappling with the metamorphosis of criminal tactics and the advancement of technology. These trends are a danger to any surviving business and require well-thought-out approaches to mitigate losses. According to the Association of Certified Fraud Examiners (ACFE), organizations lose about 5% of their total revenue through fraud, which amounts to trillion dollars annually. This loss goes beyond financial, to damage of trust by customers, dented reputation, and legal ramifications.
To ensure your workplace is protected from these threats, it is paramount to institute solid strategies that address vulnerabilities across the business- policies, employee awareness, organization culture, and policies. Let’s delve into methods that you can employ to prevent theft and fraud in your industry.
Establishing a Culture of Integrity
It is essential to understand that a business is as good as its employees. This means that if the workforce is morally corrupted, this is reflected in your business, and the chances of making losses are high. Cultivating a culture of integrity is the foundation of dealing with fraud, and this has been supported by past research showing that institutions with high integrity culture experience less fraud. Does this resonate with you? Well, let’s look at the case of Wells Fargo, a financial institution embroiled in a scandal of fraudulent account openings. Due to the aggressive sales culture of the company, it incentivized employees to achieve unrealistic targets. This misconduct of wanting to achieve short-term gains damaged the company’s reputation.
A simple act of failing to act ethically can ruin your years of investment, a pitfall that businesses should avoid. This can happen by supporting workforce accountability, transparency, and honesty. As a human resource director, you are responsible for encouraging an open form of communication where employees can report any theft or fraudulent activities without fear. For you to effectively implement these, it is essential that you understand the nature of your corporate culture, and Lauth has seasoned experts in conducting corporate culture audits. We will ensure that the findings of the audit capture the weaknesses and provide workable recommendations.
Conducting Thorough Background Checks
“Trust but verify.” This adage should prevail when hiring new employees. Conducting a thorough background check is vital in identifying the red flags and mitigating the risk. The data released by the Society for Human Resource Management (SHRM) alludes that about one-third of job applicants provide false information on their resumes. This should scare you as a human resource director. Consider the Enron Energy Company case, deemed one of the heinous accounting frauds in history that led to its demise. If the company had conducted proper background checks on the executive, they might have uncovered the unethical behavior.
The rule of thumb is a background check is essential to prevent internal fraud and theft, which could potentially cripple your business. Most human resource directors need to pay more attention to this stage, as it is perceived to waste time. It’s understandable, but we must find a way to dispel the fact that such a process can be outsourced. Our private investigators are experienced in conducting comprehensive background checks and providing objective details that would save your company in the future.
Implementing Stringent Access Controls
We must uphold the importance of securing business’s information and critical data. Insider threats account for a high percentage of fraud incidents, emphasizing the significance of having strong access control. To avoid data breaches, it is imperative to implement pin codes, biometric scanners, and keycards since they are important tools for identifying and monitoring the activities of employees within the place of work.
Are all these stringent measures effective? The answer to this question might differ depending on whether your business has experienced a case of fraud or theft. However, it has been proven that establishing access control at the cash office prevents theft. This is because all log trails are left behind, and any theft can be traced to a specific employee. You need to know the source to mitigate. That’s why the fraud investigation service is elemental for your company.
Implementing Surveillance and Monitoring Systems
Deploying surveillance cameras and monitoring systems could be a step towards mitigating theft and fraud in the workplace. While it might intimidate the workers, it is a security awareness strategy. The study conducted by the University of North Carolina showed that cameras reduce theft and fraud by 51%. For example, in the retail sector, video analytics software can detect activities such as shoplifting and provide real-time information to security personnel to act. Now that our most excellent tool at Lauth is risk assessment, we can offer guidelines on where you could be missing regarding surveillance and monitoring. Secure your investment!
Safeguarding your business against theft and fraud needs a comprehensive approach, requiring you to examine your organization’s culture, existing policies, available technology, and employees’ awareness. Organizations can curb theft and fraud by implementing a culture of integrity, conducting background checks, implementing access control, and ensuring surveillance and monitoring systems. These protect your reputation and assets and uphold the culture of accountability. Lauth’s investigative services chip in to supplement your organization’s operational safety.
Employee fraud is common, especially in small and medium-sized businesses. It involves fraudulent activities such as stealing from your organization, deceiving your employer, or illegally gaining financial favor or personal benefits. According to one study, about 46% of organizations have admitted to experiencing fraud in the last two years. While fraud can stem from other sources like shareholders, business partners, or service providers, most fraud threats are internal rather than external. This is why it is crucial to know a fraud red flag when you see it.
Employee fraud can take several forms, but the most common ones include payroll fraud, embezzlement, theft, and bribery. While it can sometimes be hard to detect cases of employee fraud, there are certain fraud red flags to look for.
A sudden change in an employee’s lifestyle that doesn’t match their salary or benefits. For example, you should consider doing workplace investigations if some junior employees suddenly acquire costly houses and cars.
Employees suddenly become secretive and unwilling to share their processes with anyone, not even their bosses. Consider it a fraud red flag if an employee is reluctant to let a third party review their processes and procedures because the chances they are doing something they weren’t supposed to do are high.
You keep receiving tips or complaints that a particular employee indulges in fraud. If this happens, you need to commence workplace investigations immediately to get to the root of the matter. After all, there are indications that up to 42% of employee fraud cases are detected thanks to tips from known and anonymous sources.
Sudden inconsistencies in accounts. For example, sudden, excessive, and unexplainable cash transactions could indicate fraud. Be ready to get auditors to look into your organization’s account to check for discrepancies.
An employee suddenly thinks he is above the laws of the organization, and the rules do not apply to him. Once you notice this, the next logical thing is to get your internal control team on board to begin thorough investigations. Refraining from following proper procedures or adhering to the regulations of your organization is a huge fraud red flag.
You must prevent your organization from fraud as a business owner or manager. So once you notice signs of fraud, you must invest in a thorough workplace investigation to uncover all the criminals and prevent further crimes. Of course, different organizations and institution have their procedures and processes for conducting employee investigations, but these steps can help prevent fraud in your business.
Plan the investigation thoroughly.
Even if you want to investigate a particular fraudulent activity, you must ensure that your investigations have a long-term effect in curbing fraud. This is why it is crucial to plan before delving into the investigations. First of all, you have to choose a great team of investigators who are knowledgeable of your state’s laws and have a certain level of integrity, but you must ensure these investigators are on the same page with you and share your goals, methods, and deadlines.
2. Review your records carefully.
You can gather much evidence through workplace or employee investigation interviews. There is also a great deal of hard possible evidence to comb through, such as videos, records, photos, emails, or documents. Take your time to review these documents carefully to arrive at accurate conclusions. You may also review the personal file of the suspect, including their period of unused leave, whether or not they are logging in and out of the company’s accounts at odd hours, and if there have been any declines in their performance. When you take time to gather information and review it carefully, you not only arrive at an accurate conclusion on the case at hand but also open your eyes to see more loopholes so you can modify your processes to avoid the same or similar fraudulent acts.
3. Analyze your evidence accurately.
It is one thing to get evidence during a fraudulent activity investigation and another to analyze them accurately. This is why narrowing your analyses to concrete, specific, authentic, and relevant evidence for the workplace investigation is imperative. Also, you would save time and energy if you learn to separate facts from opinions. Your goal in a fraud investigation is to prove or disprove an allegation, so you must ensure that the evidence you focus on matches the allegations. However, thoroughly analyzing your evidence will help you arrive at an accurate conclusion, which could discourage other employees from fraud.
4. Drawing conclusions & making decisions.
It is imperative to make decisions once you have concluded the investigation. Your decision could involve terminating the contracts of guilty employees, sending them on punitive transfers, or handing them over to law enforcement if their crimes are punishable. Again, such decisions will deter others from indulging in fraudulent activities. By the end of the corporate investigation, you would be able to identify all the weaknesses in your procedures, systems, and policies.
Your business is your livelihood. It’s what you’ve poured your blood, sweat, and tears into establishing. So it can be very devastating to suddenly find out that your accountant has run away with your company’s money. You can actually feel like a rug has been pulled out from under you.
Accountants can steal money for many reasons, including lack of internal control, poor salaries, and obsolete technologies. This is why it’s imperative to always invest in your business by adopting the most appropriate technologies and motivating your workers through attractive salaries and other benefits. Nonetheless, some accountants steal for reasons beyond your control, such as greed. Unfortunately, you can do little or nothing to cure greedy employees.
There are, however, many ways through which accounts can steal money from your business. But then, stealing is mainly made through white-collar crimes like money laundering and embezzlement. Of course, some accountants can also steal huge amounts of money within the business premises. Fortunately, there are steps you can take to get your business back up and running with the help of professionals. Here is what you need to do;
Notify law enforcement authorities.
The first thing to do upon realizing your accountant has run off with your money is to notify the law enforcement authorities of your country. Give them details, including the accountant’s name, how much you think he ran off with, and the last time he was seen within your business premises. This step is crucial as law enforcement would do everything possible to track down the suspect early enough to recover all or part of your money before serving justice.
2. Employ a new accountant
The role of an accountant in every business can never be overemphasized. Accountants play the crucial role of making critical financial decisions by collecting, tracking, and correcting the organization’s financial decisions. So, once you’ve notified authorities, you will need to recruit another competent accountant to take over from the one who ran away with your money. While at it, remember to do a background check on the most eligible candidates before making a final decision. This is to help you not fall into the hands of another white-collar criminal.
Of course, suddenly recruiting an accountant can be difficult and stressful, but it’s essential to getting your business back on track. If you find it too overwhelming to recruit a new accountant, you can hire the services of professional recruiters to help you get a reliable and competent person to fill in the gap.
3. Review your financial records
You also need to review your financial records carefully to ensure all your money is accounted for. A thorough review will help you know exactly how much your ex-accountant must have stolen from you. However, hiring professional auditors for a detailed financial review is advisable. The reason is that professionals will carefully review your business and identify all those areas where your accountant may have stolen from you. Also, professional auditors will give you a better understanding of your financial situation, which will help you make informed decisions on how to sustain your business and prevent it from shutting down.
4.Make changes to your accounting procedures
It also makes sense to modify, update or change your accounting procedures to prevent such problems. Of course, such changes don’t just end with hiring a new accountant, as you could also implement new and more sophisticated accounting software that helps you stay on track with the activities of your accountant. Also, you could make changes to your internal accounting procedures. For example, you could limit access to only authorized personnel in interior areas such as storage areas.
5. Get help from other professionals
Dealing with the aftermath of your accountant running off with your money can be a daunting task. Fortunately, many professionals can help you through this challenging phase. For example, you can hire a lawyer or a professional investigator to cooperate with law enforcement to track and punish the criminal. Also, you could employ another professional accountant to review your financial records, identify areas where you may be vulnerable, and make changes to your accounting procedures. Similarly, you could hire professional business analysts and developers to help identify other business opportunities that could improve your organization’s finances.
Do you have adequate measures in place to protect yourself from the perils of small business fraud, embezzlement, and workplace theft? Far too many businesses don’t realize that the biggest threat to their success is usually standing next to them. In fact, in the world of enterprise, 90% of all significant theft losses come from employees. If that isn’t enough to alarm you, know that those losses lead to more than 30% of business bankruptcies. Investing in preventative measures could represent the best dollar spend you ever make on behalf of your business.
It can feel unnerving to imagine that the biggest threat to any organization usually lurks within, but there are actually numerous rock-solid small business fraud and theft prevention strategies that anyone can roll out fairly simply. Here at Lauth Investigation International, we are proud to provide various large and small business risk assessments, culture audits, employee screening services, and corporate investigations to all in their moments of need. But first, let’s explore what you can do today to protect your business against employees who are anything but team players.
Beef-Up Your On-Site Security Protocols
Sometimes, the physical vulnerabilities of any business are due to a lack of security hardware such as locking doors and CCTV cameras. But at others, they are as simple as managers having gotten sloppy about cash or inventory handling procedures or a lack of strategy when it comes to separation of duties and asset access.
Sometimes, certain employees have become so much a part of the furniture that they are given free rein to ramp up your risks—intentionally or otherwise. Overhauling common practices, policies, and daily procedures can bring such glaring oversights back into view. If in doubt, an expert risk and threat assessment can be the best way to make sure that every security hole is firmly plugged.
Conduct Comprehensive Background Checks When Hiring
Research has revealed that as many as 85% percent of employers have uncovered a lie or misrepresentation on a candidate’s resume. Some of these deceptions will have been illuminated by background checks, but others will have only come to light when the employee in question revealed their true nature—potentially doing substantial damage in the process. The best way to eliminate bad actors from your workplace is to refuse them entry, and choosing to conduct comprehensive background checks is the best way to achieve this.
Be Dutiful About Digital and Financial Safeguards
These days, everything that happens within your business leaves a trail—and that reality can be your greatest asset in mitigating risk or it can be an exposed Achilles tendon. The data that is precious to you—whether trade secrets or customer payment details—should always be indulged with the latest cyber security tools and web safety awareness training.
Meanwhile, access to financial and inventory records should be tightly controlled while every cent on the dollar is accounted for. Make daily deposits and conduct monthly checks to ensure that everything is in order. Access to both assets and the records of them should be need-to-see only, removing temptation from the get-go.
Keep Your Corporate Culture House Clean
If a stranger walked in off the street today and asked your employees how they feel about the place and you as their employer, what do you think they’d say? Corporate culture is a measure of the morale, shared values, and collective goals of any team. When this distinct workplace culture falls into ill health, employees soon stop caring about the wellbeing of the business.
Some may feel empowered or even justified to commit fraud, embezzlement, or workplace theft, while others will simply turn a disinterested blind eye. So, is your corporate culture fighting fit or in need of a trip to the hospital? A Corporate Culture Audit will reveal all of this and more. Hopefully, these pointers will help you make great strides in protecting your business against internal threats. However, if you feel you’d benefit from additional support, the team at Lauth Investigations International has your back. From employee screening to corporate investigations, our full-spectrum and tailored services offer all the resources you need to keep your business thriving. Get in touch today to find out more
When it comes to protecting your business from the myriad of frauds that occur in U.S. workplaces every single day, being informed is the first step. Our private investigators are here to help you recognize these top five types of fraud in business so they can be stopped as soon as possible.
Payroll fraud is one of the top five types of fraud that are seen the most often in businesses of all sizes but particularly small businesses. It also takes many different forms, such as employees lying about productivity, payment advances, or manipulation of timeclock records. As such, those records should be carefully monitored and all potential employees should be thoroughly screened before onboarding.
Luckily, asset misappropriation is one of the top five types of fraud that is the easiest to spot. Missing assets are going to be noticed. Most managers and supervisors keep tabs on asset misappropriation by rotating out staff who are in charge of supervising inventory or cash kept on hand. It’s also crucial that any accounting positions are not singular, and finances are managed by more than one person.
Invoice Fraud Schemes
This type of fraud is a bit more complicated, and usually involves an employee who works in accounting. It’s achieved by generating fake or inflated invoices for purposes of stealing money from the company. These invoices may detail products that were never sold, vendors who do not exist, or B2B transactions that never took place. To avoid this, all invoices must be cross-referenced with inventory or performed work that is documented.
Financial Statement Fraud
This type of fraud is sometimes called “cooking the books,” in which financial records are altered or destroyed for financial gain or to fool investors into pouring more money into the company or to boost stock bonuses. Regardless of the aim, this kind of fraud can be devastating for a company, which is another reason accounting responsibilities must be delegated to numeral members of staff in order to prevent the funneling structure that allows this fraud to happen.
This is the type of fraud most known to the general public. Anyone can commit tax fraud by failing to pay their taxes, but it can also happen when companies misrepresent their earnings to the IRS in order to fall into a smaller tax bracket, or take advantage of exemptions. In order to avoid this, it’s imperative that all earnings must be reported on time.
Given the increasing economic turbulence felt globally in 2022—thanks to factors such as the Covid-19 pandemic and unfolding energy crisis—it comes as no surprise that fraud is on the rise. Even the construction industry is not impervious to these impacts. In fact, the complexities of numerous cost outputs, suppliers, and subcontractors mean that it has never been more important to be alert to the dangers of construction fraud. If you are the one steering the ship, now is the time to be vigilant if you want to avoid your company becoming another victim statistic.
Those behind devious acts of construction fraud don’t often fit preconceived notions of what a scammer looks like. Trusted employees or long-serving suppliers can go rogue when times get tough. On the other side of the same coin, opportunists can get greedy when funds start to flow, which is why it’s never the wrong time to sure up your construction company’s fraud and forgery protection. While you yourself may not be the deceiver, if the ball of compliance gets dropped, it could be your company that pays the ultimate cost. Let’s look at some of the types of construction fraud that should be on your radar, and how a corporate investigator can help you ensure that everything truly tracks.
When Construction Fraud Slips Under the Radar
Any construction company owners knows that operating in this business means keeping a lot of plates spinning. With so many variables in play, there are inevitably also a lot of opportunities for a falsification here and a substitution there to slip by unnoticed. As if that weren’t dangerous enough, when a trusted collaborator feels emboldened, they may decide to see how far they can push their luck. If those at the helm are asleep at the wheel, construction fraud can become an epidemic that will inevitably result in a reckoning. Bringing in a corporate investigator to uncover corporate fraud at the first sign of suspicion is a prudent move indeed, but what kinds of crime will they be looking for? Here are some examples:
Subcontractor Collusion In a world that sees bid rigging and price fixing happen every day, pre-approving subcontractors is a must and precautionary measures should be structured into your contracts. When the stakes are high, ensuring that the most qualified and fairly priced candidate is the one you land upon may call for some corporate intelligence gathering.
Fraudulent Payment Applications Inflated rates, falsified invoices, exaggerated labor costs, erroneous line items, and more. Sadly, intentionally falsified payment applications represent the most common form of construction fraud.
Substituting Materials When the team that you’ve placed your faith in decides to switch out specified materials for lower-grade alternatives—or not bother placing them at all—the consequences can be dire. Ranging from scrambling change orders to repair a badly bodged project through to catastrophic structural failure, this type of construction fraud should not be overlooked.
Manipulated Change Orders Sometimes, a construction boss doesn’t realize that original design specs had omissions in their scope until an unexpected change order arrives on their desk. Diligence is the best safeguard, but when you suspect you’ve already been hoodwinked, it’s time to call in the corporate investigations cavalry.
Diverting Equipment and Materials While the odd tool may drift off now and then from the average jobsite, you don’t want your inventory to become a revolving door buffet for those who want to restock their own private stashes. This kind of construction fraud sees company purchases diverted and precious equipment siphoned away.
Manipulation of the Schedule of Values
A sloppily maintained Schedule of Values is another opportunity for construction fraud to slip by unnoticed. A sly foreman or accountant might forge phony charges against concealed buyout savings in order to pocket the difference. Only the keenest of eyes will spot this kind of construction fraud once budget and performance have been balanced.
Falsified Representations Across America, construction contracts increasingly call for the meeting of requirements such as a percentage of minority workers, environmental stipulations, local suppliers, and more. When a subcontractor intentionally falsifies their capacity to meet such an obligation, the company can find themselves looking down the barrel of a loaded litigation situation.
Seek Support From a Corporate Investigations Firm in the Know
If you suspect that your construction company may be among the many that fall prey to industry fraud in America each year, calling in a seasoned third-party investigator to launch a swift, efficient, and impartial investigation is a must. For those unsure as to whether their wider team are operating ethically, a Company Culture Audit is the ideal tool for illuminating the current state of play and cutting a clear path towards prevention and deterrence. Safeguard the integrity of your business against construction fraud with specialist support from Lauth Investigations International. Our team is ready and waiting to answer your questions today.