Business Fraud Prevention

12August
2019
Accounts Receivable Fraud: Lapping Up Profits

The sale has been made, the customer has paid, yet the company receives no revenue. How can this happen? Accounts receivable fraud, commonly referred to as “lapping,” occurs when an employee is entrusted with processing customer payments but then steals the money for his or her personal needs. Once a lapping scheme begins, subsequent checks are used to cover the missing checks. The employee generally must continually monitor accounts so he or she can steal from one customer to pay others. Depending on the volume of checks received, a lapping scheme can be initiated and maintained over a number of…

13June
2019
Help Prevent Invoice Fraud at Your Business

When a supervisor with Burlington Northern Santa Fe Railway stumbled upon a way to submit fraudulent invoices to his employer, he enlisted several others in the scheme. In the end, more than $2 million in bogus or inflated invoices (details of the case are in the right-hand box) were submitted. How the Fraud Worked Two Kansas men pleaded guilty in 2010 to conspiracy to commit wire fraud against Burlington Northern Santa Fe Railway (BNSF). Matthew Wyrick, 35, and his father-in-law, Robert Steele, 64, were charged with various offenses related to BNSF, where Wyrick was employed as a supervisor in the…

22April
2019
Minimize Legal Risk During Internal Investigations

Let’s say an employee tips you off that some payments to a vendor seem suspicious. After looking into it, your company discovers that $60,000 in payments were all authorized by one employee and no one else in the purchasing department has heard of the vendor. You become concerned about fraud. What should you do? Clearly, you need to start some sort of investigation to determine if there is fraudulent activity going on. You might think it’s best to hand the matter over to the HR department and let them look into the matter from every angle but that could be…

21February
2019
Six Red Flags of Financial Statement Fraud

Many incidents of fraud are discovered inadvertently. For example, a staff member may notice something that doesn’t seem right and mentions it to a manager. Upon investigation, internal theft is found. But considering the potential damage that fraud can inflict on a company, it is obviously better to do more than depend on mere chance. Keep in mind that the earlier a company detects fraudulent activity, the less damage will be done. With that in mind, here are six red flags that can suggest wrongdoing in your workplace: 1. Unfair practice charges. If your company is sued and the lawsuit…

27December
2018
Eight Ways to Prevent Expense Account Fraud

Your employees may be cheating your company by turning in bogus expense reports. While each of these transactions may be small, they can add up to a bundle. Not only does expense account abuse erode profits, it creates an environment in which employees think they can get away with stealing — and perhaps move on to more lucrative fraudulent schemes. In addition, poor expense account reporting can jeopardize your company’s tax deductions for employee reimbursements if you ever get audited by the IRS.  For all these reasons, your company should have strict expense account policies. Here are eight specific suggestions: Create…

01November
2018
Tuition Reimbursement: How to Prevent Fraud

Investing in employee education and training is crucial to the long-term success of most companies. In order to remain competitive, many employers offer tuition reimbursement programs to attract and retain talented employees. The programs also provide tax benefits. The vast majority of employees that participate in tuition reimbursement programs do so in compliance with their companies’ rules. However, these programs can also fall victim to fraudulent activity in ways that might surprise you. For example, in one case, four employees submitted more than $400,000 in fraudulent expense requests to a company for college classes they never even enrolled in. (See right-hand…

06September
2018
How the Risk of Detection Reduces Fraud

Do your employees feel like they’re being watched? If they don’t, they may be emboldened to steal. In the same way that putting more police officers on streets tends to reduce crime, making your company’s anti-fraud activities more visible can discourage fraud perpetrators. Good internal controls are critical to preventing fraud. But many companies have learned the hard way that employees bent on fraud can find their way around internal controls if the incentive outweighs the risk. You must, therefore, make sure that your employees — including senior managers — understand that the risks of committing fraud are greater than…

12July
2018
Important Facts About Whistleblower Hotlines

In recent years, many companies have implemented hotlines for employees, vendors and others to anonymously report workplace behavior that is unethical or illegal. These hotlines allow employees to confidentially come forward with important information without fear of retribution. Just by having one in place, you can reduce fraudulent incidents, according to a survey done by the Association of Certified Fraud Examiners. But setting up an effective hotline involves more than putting in an additional phone line. Here are 14 important considerations that can make your hotline more successful. After all, once you set one up, you want people to use it….

17May
2018
Ten Steps to Help Thwart Employee Theft

There are many types of fraud committed against businesses — from workers’ compensation scams to complex corporate swindles — but one of the most common types is simply employee theft. This can occur when employees take money from a cash register, forge names or change amounts on company checks, engage in creative bookkeeping a number of other schemes. The Fraud Triangle Certain situations drive some people to steal. It’s sometimes called the “fraud triangle” and it generally contains three elements: Pressure. This is often financial stress with the individual unable to share the problem and seeing no effective, legal way…

22March
2018
A Guide to Identifying White Collar Employee Fraud Risks

You can call it psychology or human nature. When some managers or employees are exposed to certain conditions, the odds go up that these individuals will commit fraud against your business. The situation is worse if your company doesn’t have a full range of internal controls designed to stop fraud before it happens. In other words, when the motive for fraud meets the opportunity for fraud, watch out!  Specifically, beware of these red flags: Personal financial stress. Sometimes, managers or employees with access to company assets are under serious personal financial stress (due to bad investments, divorce, family illness, drug…