What To Do If You Think You've Discovered Fraud at Work?
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What To Do If You Think You've Discovered Fraud at Work?

If you're managing employees, you might discover someone defrauding your employer.

Apple MacBook beside computer mouse on table
Photo by Luca Bravo on Unsplash

So, you think you’ve discovered fraud at work. What now? Occupational fraud comes in many types and can heavily impact businesses. You should do your part by identifying the signs, making a report and dealing with the employee as soon as possible.

What Does Workplace Fraud Look Like?

There are many ways someone can defraud an organization, but the most common types of fraud in the workplace involve employee or vendor theft and deception. Most situations result in financial or physical losses.

1. Theft

Workplace theft can involve stealing time, data, property or money. It’s not always obvious — and the amounts they steal aren’t always large — but it can cost the organization a lot the longer it continues.

2. Bribery

If workers receive gifts or money in exchange for treating someone better, that’s called bribery. For example, if an auto-shop employee starts accepting things from a client and gives them nicer parts at half the cost, that’s bribery. Even though it seems like the relationship wouldn’t affect the organization, they often take advantage of company resources.

3. Embezzlement

Embezzlement involves a trusted employee taking advantage of their position to steal funds from the company. It’s basically theft, but the process is different. Since embezzlement isn’t as apparent as theft, it can go on for a much longer time.

4. Vendor Fraud

Surprisingly, workplace fraud isn’t limited to employees — vendors can defraud an organization with overbilling and dishonest reporting. For example, a delivery driver could report a product as lost or damaged when, in reality, they pocketed it. While it likely affects their jobs more than yours, your company can still lose resources and money.

How Does Fraud Impact Your Workplace?

Reporting what you notice is essential, even if it doesn’t feel like your place. For example, a major financial institution had to pay $614 million after knowingly creating and approving loans from government agencies. Despite managers finding more than 500 faulty loans during an internal review, they took no action. Your inaction can cost your company even if the initial fraud isn’t your fault.

Knowing how to recognize and deal with such issues is crucial because it can be costly if left unchecked. The Association of Certified Fraud Examiners claims losses from fraud total $4.7 trillion globally every year. It might impact your workplace more than you realize.

How Do You Spot Potential Fraud?

Although some companies are testing technology like artificial intelligence to detect and prevent fraud, it’s still up to workers to notice and report it. There are typical behaviors most fraudsters fall back on, but there’s no one-size-fits-all for workplace fraud.

For the most part, just keep an eye out for anything unusual. That might sound challenging, but there are usually plenty of red flags when someone deceives a company. Though it may seem surprising, over 85% of people show obvious behavioral signs when committing occupational fraud. If someone’s demeanor suddenly changes or you’ve received tips about them, they should be a suspect.

A majority of places experience fraud. More than 51% of organizations in 2021 claim they experienced some type in recent years, with over 25% reporting financial losses of over one million dollars. Keep an eye out for changes in behavior or inconsistencies in accounts to recognize when an employee is being deceptive.

What Are Some Signs of Fraud?

Justification, pressure, ability and opportunity are conditions that make fraud much more likely in the workplace. If someone has exclusive access to company resources or funds and feels they have the right to exploit them, they’ll likely start.

Here are some signs of fraud in the workplace:

  • Secretive behavior: If employees refuse to show others their work or start finding excuses to be in the workplace alone, they have something to hide.
  • Increased expenses: Sudden or gradual increased expenses can be a bright red flag for managers and a sign of fraud.
  • Repeated complaints: If multiple employees come to you for the same reason, you should believe them. Even if it turns out to be nothing, it’s better to be safe than sorry.

There are many types of fraud, so it’s best to look into strange behavior or account inconsistencies if you feel something’s up. You can help protect your company by investigating.

What Should You First Do When You Discover Fraud?

You need to move fast when reporting to limit the amount of damage. Before making a report, try to get as much information as possible. It’s only smart if you can get in and out without the fraudster noticing because you don’t want to tip them off.

Get ahold of things like invoices, contracts, purchase orders or credit card statements — any physical copies of their deception. If you can, obtain digital documents. Store everything in a safe place where they can’t access it.

Write down what you saw, know and assume for an accurate reference. List every detail of the “what,” “who,” “when,” and “where” because it might help investigators. Also, write down what you suspect the potential loss is and who else might know about the situation.

How Do You Deal With the Employee?

It might be wise to temporarily suspend the employee or their capabilities to prevent them from committing further fraud. You can personally inform them of the pending investigation since it’s a sensitive issue. Don’t let them take any company property or log back into their account since they might try to erase the evidence. Review their contract and your workplace policy to see your options before you move forward.

An internal review is necessary, but don’t neglect to inform the proper regulatory bodies if you deal with sensitive information or government affairs. Since every federal agency has someone whose entire job is to investigate fraud against them, you can report to them if necessary. An organization can pursue legal action or terminate the employee after the investigation.

Fraud in the Workplace

You can protect your organization by reporting what you see and kickstarting an investigation. It might feel challenging or confusing at first, but it’s best to stop it as soon as possible for the safety of your job and company.

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This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.

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