What Are the Different Types of Employee Fraud?
Employee fraud occurs when an employee of a company willingly and knowingly engages in deceitful activity, often for personal gain. Undetected, employee fraud can cause serious financial damage to a business, as well as possible public relations harm. There are many different types of employee fraud, including misuse of assets, corruption, embezzlement or financial fraud, and worker's compensation fraud.
Misuse of assets is one of the most common forms of employee fraud, partly because it can come in so many guises. Appropriating company supplies for personal use, such as stealing printer paper, cartridges, or pirating software, is one type of misuse of assets. Using a company car or expense account for personal use instead of business is another common version of this type of fraud. The most basic form of asset misuse is literal stealing, sometimes straight out of the cash register or tip jars. Employers can do a lot to protect against this type of fraud by ensuring redundant security systems, monitoring employees carefully, and reducing the opportunities for this type of crime.
Corruption may sound like a dirty crime reserved for shady politicians, but it can be a form of employee fraud as well. Corruption often occurs when an employee offers discounts, services, or preferential treatment in return for bribes or kickbacks from an outside individual or business. A manager who agrees to recommend a painting company for the building if they will paint her house for free is an example of employee fraud through corruption.
Financial fraud and embezzlement are similar to misuse of assets, but can be more subtle and difficult to track. This type of employee fraud is often reserved for workers with access to company funds and accounting and typically involves the false inflation or deflation of financial records. If a department head erases expenses from a budget statement in order to ensure higher bonuses thanks to decreased spending, this might be considered a type of financial employee fraud. Embezzlement typically occurs when a person entrusted with company funds steals them for personal use, while covering his or her tracks by falsifying financial information.
Employee fraud is a serious and costly problem throughout the business world, and can occur within any organization, large or small. According to some experts, the key factors that raise the risk of fraud are known as rationalization, opportunity, and motive. Called the fraud triangle, these three factors explain how and why employees commit fraud: either they can rationalize their behavior in some manner, are unafraid of security measures, or have a desperate need for the money. Employers can do a lot to prevent employee fraud by attempting to address the opportunity and rationalization components of the triangle by creating a thorough security system and taking steps to address disgruntled employees who may be able to rationalize fraud.
I answered an ad on Craiglist and had my antique truck delivered to the auto shop and met with a person who said he was the owner. We agreed on a price to have some work done and the time limit would be three to four weeks. He said he would also call me weekly and give me updates. On the 29th day of my vehicle being in his possession, I received a phone call and found out he was not the owner of the shop, that he had taken my truck from the shop and he and his girlfriend were using it for their personal, everyday lives, told people it was theirs, etc. There are numerous witnesses to his actions and he is on video.
I also gave him $1,000 down and I believe it was two weeks later, gave him another $700. The owner of the shop was closing his business and this employee was fully aware of that. When the owner saw the truck, he asked what it was doing there and why this employee and taken in new jobs. The employee said it belonged to a big biker and he had agreed to just put a few hoses on. The next day, the owner found the truck gone. He wondered how that could be, since the day before he had taken all the keys to all vehicles on the property, and he went by the employee's house and he had the truck.
The owner told the employee he needed to bring the truck back to the shop and give him the name and number of the owner, and he would not do it so the owner called the police to report a stolen vehicle. The officer told him he could not report the theft, that the owner of the truck needed to do it. The owner explained this employee had taken all paperwork on it and didn't know who that was. The employee refused to let the police do a VIN check or come on his property.
The following day, I found my truck with the help of the owner and when the police were called, they would not arrest the employee for taking the vehicle, nor arrest him for pocketing the money down for the work which should have been deposited in the shop account and told us it was a civil matter. I am speechless. How can this be? This is insanity!
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