The Association of Certified Fraud Examiners has just released the 2008 Report to the Nation on Occupational Fraud and Abuse. Based on data from 959 cases of occupational fraud investigated by Certified Fraud Examiners between 2006 and 2008, this study is an in-depth analysis of the causes, costs, and ramifications of fraud in the workplace.
According to the Report, there are several red flags that indicate the possibility that an employee may commit fraud. These indicators consist of behavior patterns that management should be aware of when attempting to detect and prevent fraud in their organization. While not every indicator is listed here, the following five red flags are critical warning signs:
1. Living Beyond One’s Means. This is the most common trait found in employee theft cases. The need to support an affluent lifestyle often leads to embezzlement and other crimes.
2. Financial Difficulties. Sudden or persistent money troubles can drive normally honest employees to desperate acts.
3. A “Wheeler-Dealer” Attitude. Employees that act in a conniving or scheming way were often found to have engaged in fraud. Over 20% of the cases studied involved a perpetrator who demonstrated this attribute.
4. Refusing to Take Vacations. Often viewed as “the perfect employee”, many fraudsters refuse to take vacation time because they fear their scheme will be discovered in their absence. In fact, this is one of the most common ways internal theft is detected.
5. Past Employment Problems. Past behavior is a good predictor of future performance. If an employee has stolen from his company in the past, chances are good he will steal again. Pre-employment screening is a great way to identify this red flag.
These indicators are not guarantees that an employee is currently stealing or planning to do so in the future. They are simply warning signs that employers can watch for to detect and prevent fraud before it cripples their business. Employee assistance programs can help at-risk workers before the problem worsens. For more information on the Report, contact the Association of Certified Fraud Examiners at http://www.acfe.com.