Part. II Continued . . . Embezzlement and Internal Fraud Prevention

January 21, 2015  •   Uncategorized  •   53 comments

Talk about a quote that really hits-the-nail-on-the-head, this quote by William Wordsworth, says it best:

“In modern business it is not the crook who is to be feared most,

it is the honest man who doesn’t know what he is doing.”

There is nothing magical or mysterious about the ways in which the majority of incidents involving embezzlement and internal fraud take place within any organization—large or small.

In the greater majority of these cases, the fraudster’s methods of operation were deceptively simple. Let’s take the true case example of Sara; only Sara’s name is fictitious:

Having been employed by the company for 10 years, Sara had worked her way up to lead cashier and became a highly trusted employee—one that was always there to help—someone management could always rely on.  Sara believed that by working hard and showing her dedication to the company she could achieve success and she was correct. As a reward, her annual salary had been elevated to $28,000 at the medical facility. While she was well-liked and respected by management, what they didn’t know was that Sara liked to spend money, and had dreams of living a lifestyle that far exceeded her earnings! She wanted to buy luxurious things, drive a fine car, wear designer clothes, and take nice trips. Sara knew her job inside and out. She also knew that she was highly trusted in her position and that she rarely, if ever, received any supervision or oversight relating to the work she performed.  Sara also had discretely learned where the facility’s accounting system’s weaknesses were, and by applying this knowledge, she knew that her luxurious lifestyle opportunities were only a few computer clicks and cover-ups away.  No one seemed suspicious or saw any potential warning signals that indicated something may be amiss when Sara bought a $600,000 home, three luxury automobiles, and started wearing expensive jewelry and clothing.  After all, Sara was a highly trusted employee. The embezzlement scheme continued for four years, and then one day Sara got careless and left a questionable financial document openly exposed on her unattended desk. Her supervisor spotted it, and Sara was finally caught. When the Grand Jury indictment was handed down, Sara was charged with four counts of embezzlement, 24 counts of federal money laundering, and three counts of income tax evasion. After pleading guilty in court to a series of lesser charges, Sara received a five year prison sentence, plus an additional 6 years of supervised probation when she was released, and ordered to pay $2.8 million in restitution for monies that she had embezzled from her employer.

Sara’s case serves as a good example to show that while the types of businesses differ, the methods of these theft schemes are generally the same; a ‘trusted’ employee betrays their employer by taking advantage of a weak or ignored financial control. The fact is that, wherever people are employed, opportunities abound for a dishonest individual to steal literally hundreds, thousands, or millions of dollars from their employer with little fear of detection!

Ninety to ninety-five percent acts of internal fraud and embezzlement are preventable.  Management is key!

Reduce your risk by following those four Leadership Philosophy Action Points define in this blog’s Part II. Management Anti-Fraud and Embezzlement Awareness topic that was previously published.