Signs of Employees Fraud and How to Prevent It?



Last updated on February 5, 2020 | 7411 Views


Employee fraud is a word that scares many corporate firms. The concept has gained scarier proportions in today’s era, where leaking information is as easy as sharing a clicked photo. It could be stealing cash, bogus spending, or kickbacks for leaking confidential data about the next project to the competition for some payments, thus causing a significant loss to the company.

Employee Fraud Cases

Disloyalty on the part of employees is one of the most significant damages to a company’s productivity and reputation. Though to detect employee fraud is not always that easy right now due to the encryption technology offers.

Though, we have some examples to give you an idea about the issue:-

  1. In 2008, a US Postal service employee named Joseph S. Winstead caused a massive loss to his organization to pretending to be on jury duty for 144 days. He collected 31,000$ in pay from the American government he didn’t earn.
  2. Who can forget the 2 billion $ fraud in 2018 in India in public sector organization of Punjab National Bank when talking about employee fraud?. For around 7 years, Nirav Modi defrauded the bank to this vast amount, as revealed by PNB after a CBI investigation.
  3. In October 2019, a West Milton married husband and wife got accused of forging payroll checks and stealing thousands over around 2 years. This employee fraud happened after they were fired from the company in 2017 and using the company’s credit card to buy boats, pool, furniture, and a trip to Hawaii.
  4. In July to September 2018, former Malaysian Prime minister Najib Razak arrested twice for embezzlement worth 681 million $ over 5 years involving 1MDB fund. He could face 20 years imprisonment for depositing the money in his account in 2013.
  5. In late March of 2019, the U.S Department of Justice announced the most massive health care fraud in the country’s history with more than 2 billion $ of losses. The scam got spread across 84 cases, 58 federal districts, 601 charged defendants, 165 doctors, nurses, and many medical professionals.

Signs of Employees Fraud

Here is a brief explanation:-

  1. When an employee refuses to accept any promotion or transfer, that will cause them to lose full access to a position of payments or vital records. This sign is a good indicator.
  2. Some employees may deflect questions about getting a considerable amount of money with a lottery. You can use employee monitoring software to detect if the employee is having a gambling problem, which can lead to problematic behavior.
  3. A good example of employee fraud can be the employee having a close relationship with the external auditor. The close relationship can create a bias in detecting any scam.
  4. Questionable and vague invoices can provide a big hint at signs of employee fraud. Do the serial numbers make sense or do the numbers seem inflated.
  5. The employee having personal problems can be one of the most prominent signs of employee fraud. Common Issues like divorce, association with private business, known gambling issues, or history of drug abuse, etc.

Employee Fraud Prevention

If you see signs of employees fraud, then preventing is also possible. There are a few steps experts suggest to help do that:-

  1. Know the behavioral traits of your employees to see the signs.
  2. Have a systematic reporting system to ensure employee fraud prevention.
  3. Implement stringent internal controls to safeguard the company’s assets.
  4. Hire experts in every department to have a satisfactory audit of reports and activities.
  5. Have an effective and trusted employee monitoring software in place to keep a close eye on employee activities. This tool is a practical way of employee fraud prevention mechanism.

Final Thoughts

It is a competitive market today, and employee fraud can seriously dampen any company’s prospects. Thus, every organization is trying desperately to detect fraud or scams within its ranks. Stringent reporting and analysis, coupled with employee monitoring software, can hugely help your organization.