Corporate fraud and embezzlement are potentially devastating crimes that can cause significant damage to a company. Corporate fraud impacts every industry and harms companies of all sizes. Unfortunately, most companies don’t realize they’ve been victimized until losses get close to or surpass one million dollars. This article will provide information on how to recognize the signs of corporate fraud and embezzlement and how you can prevent fraud and embezzlement from occurring in your business.
Common signs of corporate fraud & embezzlement
The problem with corporate fraud and embezzlement is that it’s sneaky. Many corporate fraud schemes take years or even decades to fully play out. Oftentimes, the fraudster is an employee or executive that you’d least expect. Sometimes it’s an accountant, a chief financial officer, or even a board member that is the ringleader of the scheme. These executives have access to the company’s financial information and are often trusted with managing large budgets or cash flows.
Not only does this harm the company, but it also hurts people who are financially dependent upon the company, such as shareholders, suppliers, and customers. The longer it takes for a company to realize that there’s an issue and start remedying it, the more damage is done. The longer it takes to identify a problem and address it, the higher the risk of financial loss grows.
Corporate fraudsters try to hide their tracks by disguising them as legitimate transactions. Here are some of the top three ways that corporate fraud and embezzlement is committed:
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Checks
The fraudster will pay invoices with a check for a company that does not exist. Corporate fraudsters often create fake companies and will pay invoices with company money that they deposit into their own individual account.
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PayPal transfers
Many companies use PayPal as a means of payment for independent contractors and other forms of business-to-business payment. Corporate fraudsters will transfer PayPal funds to a fake vendor or contractor then transfer those funds to their own account.
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Amazon purchases
Many businesses use large online vendors like Amazon for all of their purchases from paper supplies to electronics and furniture. With such a large number of entries, corporate fraudsters can easily disguise personal purchases with business transactions.
Preventing corporate fraud & embezzlement
Corporate fraud can be tricky to spot because it involves a high level of deception on the part of the fraudster. Financial losses are not the only loss in these types of cases, there is a personal component that comes to play in the loss of a key employee. Oftentimes these are trusted and long-time employees that at one time may have had the best of intentions at the company.
It can be difficult to catch a corporate fraudster in the act. However, they always leave some sort of trail. Knowing that these fraudsters will leave a trail is a key part of preventing corporate fraud and embezzlement. Spending a few extra hours per week analyzing your business’s transactions can help prevent fraud. Make sure that all transactions are recorded properly and if you aren’t sure of the reason behind a transaction, make sure you can trace who made it and why those funds were spent.
The best way to protect your company from fraud is a solid game plan. Implementing internal auditing and controlling systems can help you prevent fraudulent behavior before it becomes a monetary burden on your business. While no system can ever be 100% successful, the more protective measures you implement into the operation of your business, the less likely you are to be victimized by fraud and embezzlement.
