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Detecting employee fraud

No workplace is immune from fraud and theft. The Association of Certified Fraud Examiners Report to the Nations on Occupational Fraud and Abuse (2012) estimates that a typical organization loses five per cent of its annual revenues to fraud. Often, one of the biggest causes of fraud losses are the business’ own employees. 


December 9, 2014
By Jordan Deering

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What can employers do? Here are five strategies they should implement:
• Decrease the opportunity. Anti-fraud controls and procedures are the first step. Employers should implement policies and procedures addressing mandatory vacation — in addition to statutory holidays — for employees, as well as rotation and separation of duties. This is particularly important in accounting or other financially sensitive roles.
• Set the right tone. The message needs to come from the top of the organization: we do not tolerate fraud or theft. Management needs to actively support anti-fraud training, controls and audits.
• Give your employees support. Personal pressures, such as financial hardships, addictions and mental health concerns, underlie most employee-related fraud. Employers should offer programs and support to employees to assist with the resolution of these issues.
• Consider a whistleblower line. Employees are often the first to notice something out of place. Employers can implement a mechanism to empower their employees to report their concerns in a safe and confidential way. Tips from employees are one of the most effective means of detecting employee fraud.
• Watch for the behavioural red flags. Employers cannot afford to ignore the obvious red flags. It may be an employee living well beyond their salary, taking extravagant vacations or making large purchases.

Organizations avoiding the implementation of anti-fraud policies and procedures have too much at risk. A proactive approach by an employer to prevent and detect fraud will reduce the risk and is ultimately a cost-saving decision.  

Jordan Deering is a partner with Dentons Canada LLP (www.dentons.com).


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