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The study is titled An Insider’s View of Employee Theft. It was done last year by the business insurer Hiscox. The insurer interviewed chief financial officers, accountant and controllers whose companies were victims of theft.
The point was to get some insight on the who, how and why employees steal.
The study conclusions are fascinating. Surprisingly, it found in 79% of the cases involved two or more people in collusion. Typically the number is three.
Billing fraud was the most common method of theft. Also on the list is:
• Cash theft
• The stealing of company property or employee property
• Check tampering
• Payroll scheme
• The skimming from the top via the use of credit cards
The bigger the company, the larger the thefts. The study pointed to a CFO of a state agency who — with their son — stole over $1 million.
Hiscox’s study also found the majority crimes — 70% — are committed by people who have been employed for a year or more. The average is eight years, and the most common thefts are done by people at the manager level or above. Most often they are in the accounting or financing departments.
The survey respondents noted these thefts are not rare and 39% said they’ve seen more than one such scheme or schemes during their careers.
Embezzlement is the most common crime. Those losses — on average — are large. The average is $357,650. Just half of the companies affected were able to recover the lost funds. And of the firms that were able to collect, just 39% say the received the whole amount.
Companies are penalized in other ways as well. Even though the thieving employee or employees are terminated, 29% say they ended up having to pay fees for increased auditing.
It gets worse. A percentage point over a quarter of the employers — 26% — say they lost customers or could not attract new customers because of the crimes. Many lost business partners and the company’s reputation suffered.
Doug Karpp heads up the Hiscox crime and fidelity product. He said, “This is a pervasive issue for companies of all sizes, and the goal of our study is to underscore the importance of having a plan in place to protect a business, its employees and its customers from the far-reaching repercussions of embezzlement.”
With that he offered some insights:
Familiarity: People don’t often start stealing until they’re really familiar with the company and how things work. Once they’re set in the job, then they go to work and many times will find those willing or able to help.
Motive: This varies but usually it comes about when the employee has a financial crisis, or if they’re in desperate need for money. Many will consider the theft a “loan” that they will pay back. Of course, most do not. Then there is the group that feel slighted by the company and think the theft is justified and owed to them.
Encouragement: Usually when stealing is easy an employee will steal again. That often leads to groups stealing and plotting together.
Exposure: In 65% of thefts, a person in a company will notice that something is wrong. Usually it takes about two-years to discover and that discovery is often associated with a co-conspirator leaving the company. Sometimes it is discovered because the employee or employees have stolen too much.
Punishment: In 45% of cases the thief or thieves are not prosecuted. Even when caught and moving on to another company, embezzlers — since they are not outed — will likely try again with the new employer.
Uncovering a thieving employee or employees is not easy. Hiscox’s study offered some advice on stopping employee theft:
1. Financial responsibility needs to be in the hands of more than one employee. A fellow employee is most likely to spot embezzlement. Plus, you need to train financial employees on how to spot the irregularities, key signs and motivations that might be theft.
2. Background checks are critical. They are allowed by law and it is especially important for employees that are handling money.
3. You need to pay attention to employees that display a lifestyle that seems out of range of their salary. Sudden changes in spending habits are another clue.
4. When you spot a theft, Hiscox’s study says you need to press charges. This will send a message to other employees that you take crimes — like embezzlement — seriously. It also says you won’t let anyone leave quietly.
5. And since we are insurance agents or involved in the insurance industry, we know that insurance is a key to staying whole if large sums of cash are taken.
What most surprised Hiscox, Karpp and those doing the study is the number of companies and people that do not have financial loss insurance that covers embezzlement and other crimes.
The figure — at 75% — is huge.
Source link: Risk & Insurance