What is Fraud, and How Does It Appear in the Workplace?
To combat fraud
effectively, you first must understand what it is and how it occurs. For our
purposes, the definition of fraud from Wikipedia is sufficient:
In law, fraud is a deliberate deception to secure unfair or unlawful gain. Fraud
is both a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to
avoid the fraud and/or recover monetary compensation) and a criminal wrong
(i.e., a fraud perpetrator may be prosecuted and imprisoned by governmental
authorities).
https://en.wikipedia.org/wiki/Fraud
In other words, fraud
requires the perpetrator to use trickery, deceit, or lies to obtain some form
of benefit – often money directly, but it could be other benefits, such as
health insurance, a job, merchandise, better stock value for the company, etc.
Now, there are as many
different types of fraud as there are things to lie about. For now, I will
focus on the types of fraud and related forms of theft that specifically target
the business and the workplace. I’ll begin with the most common types of
employee fraud: Asset misappropriation, embezzlement, and employee theft.
Asset
Misappropriation, Embezzlement, and Employee Theft
Generally, these types
of fraud/theft affect either the company’s cash or its inventory or physical
assets. Frauds affecting the company’s cash or revenues include the following:
- Larceny:
stealing from cash-on-hand or deposits
- Skimming:
- From
Sales, by understating the value of goods sold, or not recording the
sales of goods, and pocketing the cash
- From
Receivables, through write-off schemes, “lapping” schemes (pocketing
payment from a customer, then using the next customer’s payment to cover
the shortfall), etc.
- From
refunds
- Fraudulent
Disbursements:
- Billing
schemes – charging the company for non-existent work performed by shell
companies, inflating the bills from vendors and pocketing the difference,
etc.
- Payroll
Schemes – “ghost” employees (pocketing paychecks for employees that don’t
really exist), falsified commission schemes, fraudulent workers’
compensation claims, falsifying or inflating wages owed, falsified
vacation time
- Expense
reimbursement schemes – mischaracterized/overstated expenses, fictitious
expenses, multiple reimbursements, billing the company for personal and
not business expenses
- Check
Tampering
- Forged
maker
- Forged
Endorsements
- Altered
Payee
- Authorized
maker
- Concealed
checks
- Register
Disbursements
- False
voids
- False
refunds
Frauds affecting the
company’s inventory includes the following:
- Misuse
– using the company’s equipment (vehicles, etc.) for unauthorized personal
use.
- Larceny
– Stealing the company’s inventory or equipment, through falsified sales
and shipping documents, purchasing and receiving documents, or simply
stealing.
In a future blog post,
I’ll summarize fraud in the form of falsified financial and business statements
and corruption.
For more information
on fraud schemes and how you can protect yourself, contact Radius
Investigations at 1-888-698-0077, or info@RadiusInvestigations.com.
Sources: https://prvteye.com/2016/09/23/what-is-fraud-and-how-does-it-appear-in-the-workplace/
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