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Employee fraud continues to be a persistent issue across all industries. According to the Association of Certified Fraud Examiners (ACFE), falling victim to fraud cases can cost organizations an average of $117,00 per case. Without anti-fraud policies and proper means of detection, it’s clear that employee fraud can pose a great threat to company stability.

Employees commit fraud when they deliberately use deceptive means to gain advantages within a company.

Fraudulent acts could range from manipulating financial statements and stealing data from company servers to using a corporate credit card for personal purchases. To mitigate these issues, it’s important to know the signs of employee theft and how to deal with them accordingly.

Employee Fraud Detection: 6 Signs to Look For

An employee adept at deception will be able to hide their tracks well, but there are some signs you can keep in mind.

1. Financial discrepancies

This sign takes form in several ways, such as an unexplained increase in purchases or inaccurate invoices. In addition, your employee could be pocketing the extra money from the overpayment of a vendor or setting up a fake vendor to transfer money to themselves.

2. Secretive behavior

An employee who refuses to have you check or share processes regarding work may be committing fraud. As much as possible, they want their activities to remain hidden, and some may even get defensive when confronted.

3. Long working hours

While some companies appreciate employees’ commitment to the company, their work hours may be a red flag. They may be working hours later or earlier than the rest of the company, which increases the chances that no one will be able to catch them in the act.

4. Suspicious lavish lifestyle

According to ACFE, 39% of fraudsters start living beyond their means. Suppose your employee suddenly starts posting purchases or taking trips above their pay grade on social media. In that case, it’s a sign to investigate your financial statements for any gaps.

5. Unexplained closeness with a vendor or customer

ACFE’s 2022 study showed that 20% of those committing employee fraud have a strange closeness to a particular vendor or a customer. If an employee of yours insists on transacting with a certain partner, bias may be a telltale sign of connivance.

6. Multiple complaints and tips regarding the employee

Another key finding of the ACFE is that tips detected 42% of fraud cases. Employees working with the fraudster might notice odd behaviors. Listen to your team if they have complaints about the suspect employee, especially if they’re in line with the previous signs.

How to Handle Employee Theft

After detecting the signs of employee theft, it’s a matter of managing the situation. Unfortunately, navigating a case can be complicated and result in legal repercussions. Here are the things you need to do when handling employee theft.

1. Consult with a legal professional

Don’t let your employee know that you’re aware of their activities. First, seek legal counsel to know both you and your employee’s rights. Then, have your lawyer check your company policies to make sure that there were no loopholes exploited that will get your employee off the hook.

2. Gather evidence

Building a compelling case requires evidence. Tips help detect fraud, but at the end of the day, they’re not evidence. Gather your financial statements and employee contracts and record your interviews with the whistleblowers. Ensure that no one else, but you and your lawyers, have access to the evidence to prevent tampering.

3. Lock them out of access

The moment you have your evidence, lock your employee out. Prevent them from accessing their company account, email, and other data sources. If they’re committing credit card fraud, contact the bank. It would be best if you also changed all passwords and codes that give your employee access to your systems.

4. Follow your processes

If your employee hasn’t resigned and fled, follow your company’s policies. The process may include scheduling a meeting and allowing them to explain their side. Then, determine the violated policy and the corresponding disciplinary action. Finally, depending on the severity of the case, you can terminate the employee.

Remember to follow your process to protect your company from lawsuits, such as wrongful termination.

5. Don’t publicize the details

As much as possible, keep the case details between you, the affected employee, and your legal counsel. However, it would help if you curbed the urge to make an example of them by announcing all the details to your employees. Publicizing the situation could open you to a defamation lawsuit, which will take more time and money from your company.

Prevention is Protection

Employees are a company’s biggest asset, but there’s no denying that they can also threaten an organization. Employee fraud can be as small as stealing office supplies or as severe as selling data to another company. No matter what shape or form it may take, doubling down on prevention will help you avoid the large potential losses caused by fraud.

The good news is that preventing employee fraud can start as early as recruitment. Proper screening and background checks will allow you to pinpoint individuals who are most likely to cause harm to your organization. Paired with identity and access management solutions, your company’s security infrastructure will be strengthened tenfold!

Need effective employee verification software to complement your company’s hiring policies and security systems?

Contact Q5id today to learn more about our employee verification software.

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