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 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 include 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.
If you own or run a business or organization, then you need to be concerned about fraud or internal theft. Fraud is a major problem that can, and has, affected organizations of all kinds, from businesses to non-profits, from small mom-and-pop stores to multi-national corporations.
Every year, the most respected anti-fraud organization in the world, the Association of Certified Fraud Examiners, releases its annual Report to the Nations. The Report is a comprehensive analysis of fraud – who is affected, how it occurs, and how much it costs. The 2016 Report revealed some frightening statistics:
• A typical victimized organization loses 5% of revenue in a given year due to fraud
• Median losses due to fraud are approximately $150,000
• 23% of cases caused losses of $1 million or more.
• For-profit organizations were targeted in two-thirds of reported cases, and had higher median losses.
• Median losses for small organizations (with less than 100 employees) were the same as those incurred by the largest organizations (with 10,000 or more employees) – but those losses have much greater impact on small entities.
• Most occupational fraudsters are first-time offenders – only 5.2% of reported offenders had previously been convicted, and only 8.3% had previously been fired for fraud-related conduct.
The bottom line, of course, is that the leaders of every organization need to take the risk of fraud seriously, learn how they may be vulnerable to fraud, and take steps to protect themselves.
In future blog posts, I will detail common fraud schemes, case studies of notable large and small frauds, and strategies for how you can fortify your organization against the threat of fraud or internal theft.
For more information, contact Radius Investigations at info@RadiusInvestigations.com or call us at 888-698-0077.
Reuters recently reported that the large pharmaceutical company, AstraZeneca, will pay $5.52 million to the U.S. Government to resolve a foreign bribery probe. The SEC and the DOJ investigated AstraZeneca for alleged improper payments made by its sales and marketing staff to state employees in China and Russia. The company denied any wrongdoing in the settlement.
AstraZeneca was investigated for violations of the Foreign Corrupt Practices Act (the FCPA), which basically prohibits companies that operate in the United States from bribing foreign government officials to gain access to those countries’ markets. As this settlement makes clear, the FCPA has sharp teeth. The payment of settlements, fines, sanctions, and the cost of conducting investigations and litigating FCPA violations can run well into the millions, even without any actual convictions or judgments.
So how can companies seeking to tap into lucrative foreign markets protect themselves from misconduct by their overseas employees or agents? Many companies hire local consulting firms or business agents to act as their representatives in foreign markets in order to keep their costs down. How can these companies be sure that their foreign representatives act in a way that complies with U.S.-based legal and ethical standards? And how can they do it in a cost-effective way?
As with many challenges, preparation is key. In this case, preparation involves conducting robust legal, practical, and reputational due diligence focusing on these prospective local agents and employees. For this type of due diligence investigation to be most effective, it must combine two parts. First, it must utilize local, “boots on the ground” resources that know the culture, systems, and policies of the country at issue. Second, it must have an objective, third-party perspective that blends the local know-how with an understanding of how those issues may affect U.S. companies’ risk exposure, liabilities, and reputation. The process is not a simple one, but a robust due diligence investigation, conducted by seasoned, objective professionals, can save businesses millions in legal fees, fines and penalties, and settlement costs – not to mention the potential damage to reputation and brand.
The article reporting AstraZeneca’s FCPA settlement can be found at:
https://www.channelnewsasia.com/news/business/astrazeneca-to-pay-us-5-5/3087376.html
For more information on conducting international due diligence and background investigations, contact Radius Investigations at 631-351-6473 or info@RadiusInvestigations.com
Radius Investigations has helped many law firms involved in litigation. We excel at doing what is necessary for lawyers to succeed in court, including: finding witnesses, locating hidden assets, verifying injury claims, uncovering evidence to help criminal defendants, and more.
If you're an attorney involved in litigation and need of our help please contact us at (888) 698-0077.
Last month was one of great sadness for America, but a sadness which comes with a bitter sense of familiarity. With the world still reeling from news of the on air murders of a reporter and a cameraman in Virginia, people are once again asking themselves ‘How was this allowed to happen?’
In a country where gun crime is endemic, where few people want to give up the right to bear arms, is it still possible to protect ordinary people? What measures need to be put in place to make sure that people like WDBJ-TV reporter Alison Parker and cameraman Adam Ward do not get caught in the cross-hairs of somebody who should have been labeled a danger from the start?
Almost every day, the news reports instances of businesses being victimized by fraud, theft, breach of computer security, or other serious problems. Many of these problems are caused by the business's own employees. One of the best ways for businesses to help prevent themselves, and their clientele, from being victimized in this way is by conducting pre-employment background checks.
Employee Background Check Provider in NY
For some businesses, running background checks can seem like an unnecessary expense. However, there are a variety of reasons that it's a smart idea to always be diligent about checking your employees' backgrounds, both before and after hiring them.
1. It Helps Weed Out Dishonest People
Quite frankly, about half of the applicants you receive for any one job opening will be lying to you about something. It might be something small like dates or a job description, but it might be something big, like revealing that an applicant never held that job at all, or lacks the qualifications they claim to have. When you have so many people applying for a single job, checking up on references, experience, and education can help make the pool of viable candidates that much smaller.
There are many aspects to running a business. One of them is to prevent employee fraud. Theft has been around since the beginning of time, and it is not going away any time soon. In fact, in the digital age, criminals are more sophisticated than ever before. However, by hiring private investigators, you can mitigate the risk of crime to your business, helping to protect your assets and profits. Here are some examples of how private investigators can protect your business.
Hire slowly and fire quickly. This is a common adage among successful entrepreneurs highlighting the importance in identifying the right staff. People can put anything on a resume. They want that job, and many will say anything to get it. This is the reason it's not surprising that in a survey of employers, approximately 70% said they caught applicants not telling the truth.
As a business owner who counts on the people you hire for the productivity of your company, do you really want an employee who will lie on a resume? As a result it is crucial for you to perform a employee background check to verify the honesty of the people who seek your employment.
Today, an estimated 90% of major employers in the country utilize employee background checks to ensure that their employees are being honest on their applications and that they're a good fit for the business. These pre-employment screenings can look for fraudulent claims on an application, criminal history, financial history, and much more.
It's important to take a closer look at just why it's critical to utilize employee background checks, and what it really comes down to in most cases is cost. By thoroughly scrutinizing the background of the people you may hire, you'll be able to ensure that you don't cost your company money by making hiring mistakes. Here's a look at some of the ways this is true.