Employee fraud - could you be a victim?

1st June 2016 by Fiona Hotston Moore

Employee fraud is far more common than any other fraud. 

It is estimated that 85% of all reported fraud is by employees and the sums involved are increasing.  50% of employee frauds cost the business less than £100,000 but a staggering 23% cost in excess of £1m.

In the retail sector, more goods are stolen by employees than by shoplifters and it’s estimated that one in three employees will take from their employer if the opportunity arises. This can include inflated expense claims, helping themselves from the stationery cupboard, fictitious employees or fraudulent banking transactions.

So how can a business protect themselves from fraud?

The key to deterring the would-be fraudulent employee and to uncovering a fraud is culture, awareness and scepticism.  If something doesn't sit comfortably don't ignore it.

Typical signs that something may be wrong include:

  • An employee who is working long hours.
  • An employee's behaviour changes or they become defensive or evasive.
  • An employee makes an unusual luxury purchase which doesn't seem to sit within their means.
  • A ‘cosy’ relationship between an employee and your customer or supplier.
  • Small differences in reconciliations, a reluctance to reconcile accounts or unexplained debit balances on a supplier ledger.
  • Exceptionally good performance by your business or a department within the company.   Good performance should be subject to as much management scrutiny as poor performance.
  • Frequent visits by a member of the employee’s family or friends.
  • An increase in wastage or customer complaints.

It is essential to conduct full employee checks on all employees, including temporary ones, and it is also worth checking your business insurance adequately covers the risk of employee fraud.

All businesses should consider seeking an external review of their systems and checks and larger businesses should consider an external check on their purchase ledgers. These audits don't just uncover deliberate fraud but often uncover significant overpayments, duplicate payments and unclaimed discounts and therefore are often offered on a ‘no-win no-fee’ basis.

It is, of course, a difficult balance.  And whereas it is important to trust and respect your team you should also maintain a healthy level of scepticism.

 If you have any concerns that you would like to discuss please contact Fiona Hotston Moore.


Fiona Hotston Moore

Fiona Hotston Moore

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