Hiring employees requires significant trust. Sadly, that trust is sometimes misplaced, and the employer discovers their employee has been committing fraud.
While some red flags, such as missing money or falsified records, may be blatant, others are subtle and easy to dismiss. By recognizing some of these overlooked indicators, businesses can intervene earlier. Here we’ll look at four.
1. The employee who never takes time off
An employee who avoids sick leave, forgoes vacation or insists on being present for all financial processes is often admired for their dedication. However, this behavior can also be a sign of fraud.
Some schemes require constant monitoring to avoid detection. Mandatory vacations and job rotation can help prevent fraud, allowing others to review the employee’s work.
2. Excessive control
Having a single person in charge of a process allows fraud to thrive. When one employee handles billing, payments, reconciliations and approvals without supervision, there is an increased risk of abuse. Even long-term employees can be tempted when controls are weak. A system of checks and balances can prevent fraud from taking root.
3. Overly close relationships with vendors or clients
Employees who manage vendor or customer accounts can sometimes enter into inappropriate financial arrangements, such as kickbacks or side deals. The employee may display unusual favoritism toward a particular supplier and be reluctant to rotate vendors or put projects out for competitive bidding.
4. Unexplained lifestyle changes
Luxury items, traveling or paying off significant debt can raise concerns if they don’t align with known compensation levels.
While these changes may be due to a windfall or savings, it’s important to consider the possibility of fraud if they coincide with access to company funds, financial records or customer accounts.
Employee fraud can hurt the company by exposing it to regulatory violations, customer lawsuits and reputational harm; therefore, it’s crucial to respond to warning signs. However, accusations and impulsive action can lead to bigger problems. Working with a legal professional before conducting interviews or discipline can protect the company from claims of wrongful termination or retaliation.