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Embezzlement Is On The Rise: What Steps Should Family Employers Consider?

December 25, 2020

According to LexisNexis, United States e-commerce and retail merchants have seen a 7.3 percent increase in the amount they lose to fraud each year. LexisNexis found that U.S. employers lose $3.36 for every dollar lost to fraud, which has increased $0.96 over the last five years.

Fraudsters have attacked many organizations recently and cybercriminals have greatly increased the amount of ransom they demand, according to experts at Gorilla Technology.

A report from KPMG showed that 80 percent of Australian senior executives think their organization is vulnerable to fraud. New Zealand recently allocated $10.8 million to the Serious Fraud Office to fight fraud and financial crime.

The number of successful monthly fraud attempts has increased 43 percent in the U.S. The average amount of fraud attacks has increased nine percent monthly.

The increase in fraud could be in part due to sophisticated, malicious bots posing as legitimate customers. Nearly 60 percent of digital retailers said that distinguishing between a real customer and a bot is a top concern. Experts believe fraud will continue to increase, and they recommend that organizations conduct a complete assessments to address digital fraud. "A big uptick in fraudulent behaviour" nzcity.co.nz (Jun. 29, 2020); "Fraud costs increased 7.3% for U.S. retailers year over year" securitymagazine.com (Jul. 21, 2020).

Commentary and Checklist

External theft is not the only fraud risk employers must be concerned about. Family employers should take measures, especially conducting audits, to spot possible internal fraud.

According to the 2019 Global Fraud and Risk Report conducted by Kroll, the most common ways that organizations discovered insider fraud is by conducting internal audits (38 percent of the time); conducting external audits (20 percent of the time); and from whistleblowers (11 percent of the time).

Here are some additional tips to help avoid fraud among your staff:

•      Have a policy of financial oversight in place and train all new staff on your policy, notifying them that fraud is grounds for termination.

•      Do not entrust all financial oversight to only one staff member.

•      If you do have one person who oversees the majority of your finances, make sure that he or she takes vacations periodically, and have another person look over the financial record in his or her absence.

•      Make sure that staff knows that no one is exempt from your financial oversight policy, and that financial review is standard practice in the organization, not a sign of distrust.

•      Have a safe, third party reporting mechanism in place and make sure that staff knows whom they should talk to if they suspect that fraud is occurring.

•      Encourage staff to report suspected fraud by keeping the identity of informants confidential and investigating any reports of financial wrongdoing.

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