The bond between an employee and the employer is quite vulnerable and one single mistake can make the deal bitter for both the pirates. On the other hand, if the association works then it gives the desired perks and rewards. As the world doesn’t always function as per our wishes, some frauds are registered by both parties that turn out to be zero-sum for the one at the receiving end of the fraud. One of the increasing frauds is data theft by the employees of the company and being misused in other ways.

Employee fraud occurs when a worker participates in fraudulent behaviour, such as trying to steal from or trying to deceive their employer, in order to gain a personal or economic advantage. Employee fraud occurs far more frequently than most business owners realise.

Why do employees commit fraud?

The investigators came to the conclusion that the most obvious cause employees committed fraud had little to do with the opportunity and more to do with motivation—the more dissatisfied an employee was, the more likely he or she was to engage in criminal behaviour. According to one criminologist, the phenomenon is referred to as “wages in kind.” We all have a sense of our own worth; if we believe we are not being fairly treated or paid appropriately, we are statistically much more likely to try to balance the scales.

A second explanation for why employees undertake fraud is financial constraints. Donald R. Cressey, a criminologist, interviewed nearly 200 incarcerated embezzlers, including convicted executives, in the 1940s. He discovered that the vast majority committed fraud in order to meet one‘s debt responsibilities. Cressey observed that for staff members to commit fraud, two other factors had to be prevalent. They must see a chance to carry out and disguise their crimes, and they must be able to justify their actions as something other than criminal behaviour.

The common type of employee fraud

• Manipulating financial statements

Employee fraud of this type involves purposefully altering company financials in order to mislead users. These modifications always give the appearance of success. Financial statement fraud is frequently committed by planning in order to meet specific targets or achieve specific goals.

• Manipulating vendors

Every year, untruthful vendors steal millions of dollars from businesses, and most of the time, the defrauded party is unaware of the corrupt transactions. Billing schemes, bribery and kickbacks, check trying to interfere, overcharging, and price fixing are all examples of common supplier fraud.

Regardless of the revenue shortfall, vendor fraud is regarded as one of the most serious breaches of trust because it involves the connivance of stakeholders on the victim’s salary vendor and at least one contractor.

• Bribe

Abuse of power is the world’s second most common type of employee theft. 38 per cent of the 2,690 real cases of occupational fraud studied over a two-decade period involved some type of bribery. These caused a median loss of $250,000 USD.

The majority of these strategies were found to be carried out by someone in power. And, in most cases, this is what leads to a significant drop in employee morale as well as a significant drop in a company’s stock price. Bribes, kickbacks, shell corporation fraudulent acts, and threats of substitution are all examples of fraud.

• Credit card fraud

When an employee uses the company card for personal gain or purchases rather than legitimate business purposes, this is referred to as corporate credit card fraud. Regularly reviewing your credit card statements will assist you in identifying red flags.

• Payroll structure fraud

Payroll fraud, one of the most common types of employee fraud, occurs in 27 per cent of businesses and uses the company’s payroll system. According to a 2018 study conducted by the Association of Certified Fraud Examiners, illegal activity frequently goes undetected for an average of 30 months.

This type of fraud is more likely to occur in small businesses, which typically have fewer controls. Payroll schemes were found to be significantly more prevalent in the religious, compassionate, community care, and national healthcare industries. Ghost worker schemes, progress fraud, timesheet forgery, and pay packet theft are all examples of payroll fraudulent activity.

Tips to control employee fraud

There are numerous ways to control this for the safety of your data, some of which are listed below.

• Establish a work environment

A positive atmosphere at work motivates employees to adhere to company guidelines and to behave in the best interest of the company.

Often employees will respond favorably to a clear management structure, job responsibilities that are clearly defined, fair employment practices, open lines of communication between management and employees, and good staff recognition, decreasing the possibility of fraudulent activity.

• Establish prevention control

Establishing a fraud prevention program begins with recognizing that any organization is vulnerable to fraud and that the largest danger to any organization is its own employees. Any employee could cross the line and begin trying to manipulate their job responsibilities for their own advantage.

• Minimize or eliminate on-site cash transitions

If your company needs money to continue operating, make regular bank deposits to keep the amt on hand to a minimal level. Make your deposit accounts at random times throughout the day. You don’t want a would-be robber to notice that you frequently leave for the financial institution with a cash envelope.

• Develop a code of conduct

The code of practice should state unequivocally that there will be completely unacceptable for any potential fraud at any level of an organization, and any such fraud will be reported to the police. This code should also clarify what constitutes employee fraud, as this is frequently a point of contention among employees.

• Have a supervised surveillance

Powerful supervision is essential, particularly for smaller businesses that may struggle to separate duties. This can include authorization, review, authorization, and spot checks that may necessitate redoing work.

• Get the employee background check

When it comes to employees, run a background check on each one before hiring them. While a background check cannot provide a complete picture of a person’s character, it can assist in lowering the likelihood of worker thievery. An employee background check can be taken place with outsourcing companies and one gets services like employee verification, verification of employment, proof of employment, employment check, and job verification. It is suggested to go through this process once in order to strengthen your hiring operation and eliminate employee fraud. Through these services, you can check if the employee you are hiring has ever been blacklisted or not.

Conclusion

Establishing a company is a huge call in itself, as it doesn’t only mean a successful empire. Running a business requires manpower, operations, management, and the acceptance of sensitive data. Thus, one can’t simply go blind while hiring the right candidate for a particular role. It is suggested that by following the points mentioned above, you can minimize the risk of employee fraud. Even in case you have to face it anyway, you will have options to take warranted actions.

You can also choose the hiring and background verification experts to do the chore for you, in order to work with the finest.
Ratifys is mainly used for professional services to empower the employer ecosystem and network, and it allows companies to verify and rate their employees. Ratifys allows employers to create profiles and “connect” to each other (employers) on a global platform that may represent real-world professional relationships.