What is Employee Fraud: Signs and Examples in the Workplace

What is Employee Fraud: Signs and Examples in the Workplace

Employee fraud and theft are on the rise in Canadian workplaces. The CBC reported in 2017 that employee theft cost Canadian businesses $1.4 billion, with over half a million thefts occurring without employers even noticing. The problem has only gotten worse in the wake of disruption caused by COVID-19.

But what is employee fraud, and how can you recognize it? Employers must guard against both opportunistic fraud from employees and coordinated security breaches that rely on an “inside” employee.

It is impossible to eliminate the risk of employee fraud. However, awareness of warning signs coupled with a robust security system, a culture of loyalty, and incentives to promote compliance go a long way toward reducing those risks.

Table of Contents

What Is Employee Fraud?

Employee fraud involves deliberate attempts to misuse positions of trust and authority. An employee with intent to commit fraud often takes time to get to know the system they are exploiting before crossing the line into illegal behaviour.

Employee fraud can take many forms and appear at many levels within your organization. Keep in mind that the employee could be acting to enrich themselves, in service to another person, or under duress.

Types of employee fraud include:

  • Embezzlement
  • Bribery and corruption
  • Abuse of authority
  • Payroll fraud
  • Theft of data and intellectual property

Motives to commit fraud could be as varied as fear, greed, envy, a need for control, or compassion for a loved one.

Signs of Employee Fraud

Employees who have succeeded in breaching or abusing your system usually leave evidence behind when they accept funds illegally or spend funds they should not have. A robust anti-fraud system detects precursors to fraud, evidence of the criminal act itself, and suspicious activity of employees who have committed employee fraud.

Employees Working at Odd Hours

Circumventing Security Measures

Disgruntled Employees

Employees Seeking Positions that Provide Opportunities for Fraud

Suspicious Transactions

Employees Living Beyond Their Means

How to Prevent Employee Fraud

No one step by itself can prevent employee fraud, but an integrated, comprehensive anti-fraud policy reduces the risk.

Monitor Transactions

Control Inventory

Audit Your Security

Empower Whistleblowers

Set a Good Example

Understand Your Employees as Individuals

Foster Employee Loyalty

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