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The Criminal in the Next Cubicle
The fraud starts off small, in the form of a micro loan, just a couple of hundred dollars perhaps, to be repaid a few weeks later, interest free. The intent, of course, is to reimburse the employer, in this case the unwitting "lender." But before long, the perpetrator is in too deep, and the temptation to steal yet more money is just too strong. And the employer finds itself with a criminal working inside one of its cubicles. "They take just enough to help them though a financial crisis, and when the money is spent, they do it again, double dip, triple dip," says Greg Bangs, vice president and crime manager with Chubb & Son, based in Warren, N.J. Then criminals snap and "go big" as the scale of their fraud increases. In one recent case, a $4 million electronic-funds transfer was routed through four countries on three continents within 48 hours, he says. "The funds ended up in Panama, and someone was waiting outside the bank manager's office with a suitcase to get the money," says Bangs. As much as $4 million in used $100 bills was stuffed into a suitcase and never seen again. Fear is one reason for the increase in fraud. When companies decide to lay off workers and employees start to worry, they think of ways to protect themselves, says Bangs. Technology has enabled fraudulent employees to transfer more money more quickly before anyone raises the alarm, he adds. More Fraud Detected Employee fraud has always been around, but in a recession companies are more likely to notice because they are tighter with budgets. "Companies are looking under the hood," Bangs says. What they are finding isn't pretty. According to a recent survey by the Austin, Texas-based Association of Certified Fraud Examiners, the equivalent of an estimated 7 percent of companies' assets are stolen every year. ACFE data released in a 2002 survey found that the majority of corporate fraud -- 64 percent -- is committed by employees. Not surprisingly, frauds committed by managers or executives are three-and-a-half times more costly than frauds committed by other employees. The higher fraud numbers come as no surprise to fraud experts. Increased theft typically correlates with a weaker economy. That's nothing new, but the numbers are staggering. In a recessionary economy, companies lose even more, and as much as "$994 billion is walking out the door to theft," Bangs says. Says Des Plaines, Ill.-based National Insurance Crime Bureau President and CEO Joe Wehrle: "Desperate times sometimes cause people to take desperate measures." What to Do? Some preventive measures are more effective than others. The cardinal rule among fraud fighters is never, ever, let the same employee handle the same transaction from beginning to end. An employee who receives a product or a service should always be different than the employee who pays for the product or service. Also, managers need to heed the three-way rule: Always match the purchase order with the receiving report with the invoice. "It's a simple accounting control, which mitigates a lot of fraud," says Bangs. Companies should also establish anonymous tip lines. That's the best way to get insiders to rat out criminals in the next cubicle. "The anonymous tip is the single most important way to report fraud," Bangs says. A background and credit check should be routine and are well worth the $80 to $100 a head it costs to conduct. In one case, he says, an employee was found to have stolen from every employer he'd previously worked for. A simple check would have turned up the capers. The last bit of advice Bangs gives to clients is for companies to require workers to take at least a week's vacation every year. "In a complex fraud, there are a lot of balls in the air ... if they are gone for a week or two, the balls start to fall," he says. "A lot of frauds are discovered when employees are on vacation." ... vacations from which perpetrators wished they'd never returned. May 13, 2009 Copyright 2009© LRP Publications |
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© Copyright 2010 LRP Publications. All rights reserved.
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