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.