Fraud Horror Stories That Ought to Scare You to Death

Posted by Amanda Nieweler

on October 30, 2015

ScaredWomanThese fraud stories will send chills down your spine and should scare you!

Fraud can happen to your business, and it can happen where you least expect it. Believe it!

Organizations world-wide have the potential to lose an estimated 5% of their annual revenues to fraud, according to the ACFE’s Report to the Nations. Any small business can suffer theft in the workplace. In fact, one fraud instance can be devastating – the median loss per fraud case in the ACFE’s study was $145,000, and more than a fifth of the cases involved losses of at least $1 million.

In smaller businesses, employee camaraderie tends to run deep and these entities know that the cash flow is very important. Every day relies on making bank deposits to keep the business growing, but smaller businesses, typically 100 or less employees, don’t have the same cash flow to cover fraud losses and theft.

The following two videos, from the ACFE, spotlight just how easy fraud can happen to the smaller business, and how emotionally devastating the breach of trust can have on employees and owners. You know the old saying ‘right from the horse’s mouth’? These videos are just that (click each image to play the video):

Fraud can happen to your business    Fraud: too much trust

Fraud: Yes, it Can Happen to Your Business
Too Much Trust: How Fraud Happens Where You Least Expect It

The most pressing message these videos highlight is the importance for businesses to be proactive and put systems and checks into place to ensure that the work their employees are doing isn’t falling under the radar. As the second video highlights, the smallest and simplest of frauds, born out of opportunity and ease, turn into long running episodes costing the business a lot of money – and emotional strain over the breach of trust:

  • One employee should not have all the control
  • Systems need to be put in place for handling cash
  • Deposits should go to a signing authority in the company as another set of eyes

Lessen your vulnerability to fraud:

  • Adopt a code of ethics for management and employees and evaluate internal controls for effectiveness. Identify areas of the business that are vulnerable to fraud
  • When hiring staff, conduct thorough background investigations
  • Educate employees on the warning signs of fraud? Ensure that staff members know basic fraud prevention techniques
  • Implement a hotline. Fraud is still most likely to be detected by a tip. Providing an anonymous reporting system for your employees, contractors and clients will help uncover more fraud
  • Communicate regularly to staff about anti-fraud policies, ways to report suspicions of misconduct, and the potential consequences (including termination and prosecution) of fraudulent behavior

Download your fraud prevention checklist!

Fraud Checklist