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U.S. Companies Report Alarming Increase in Employee Fraud

“Infinity screening” can protect businesses during the economic downturn, Accu-Screen reports

Chalk up one more negative consequence of the economic downturn: employee fraud and thefts are on the rise.

Employees facing increased financial hardships (such as having a spouse who was laid off, a sick family member or a home at risk of foreclosure) are more likely to take illegal actions to augment their incomes.

“The stress of these types of situations has lead to violence in the workplace, embezzlement and identity theft,” says Kevin Connell, chief executive officer and founder of Accu-Screen. “Employee larceny and other illegal acts can weaken or even ruin a corporation.”

In a February 19th Wall Street Journal article on this trend, Simona Covel reported: “Small companies are especially vulnerable because they often lack stringent internal controls to prevent fraud. Sometimes managers of affected companies attribute lost funds to lower sales – never even suspecting foul play.”

The following facts show how widespread this problem is:

* American organizations lose an average of 7 percent of their revenues to occupational fraud, according to the Association of Certified Fraud Examiners.

* The costs of fraud in the U.S. are estimated at billion annually.

* Embezzlement has been the No. 1 financial crime for the past four decades; almost one-third of all company bankruptcies can be attributed to embezzlement.

* Fraud, identity theft and property thefts account for 60 percent of a company’s annual losses.

* Common employee frauds include false invoicing, check forgery, theft of cash and goods and setting up ghost employees or ghost vendors.

Many frauds are conducted by trusted long-term employees who are in positions of responsibility, such as bookkeepers and accountants. Companies should watch out for employees who are living a lifestyle that seems beyond their means, as well as employees who never take a vacation or try to prevent others from seeing the firm’s books or accounting software.

While most hiring managers understand the benefits of screening new hires, it’s less common for companies to continue screening their current employees. This can be a costly mistake. There is no guarantee that an employee who is hired with a clean criminal and credit record will remain that way.

Periodic credit and criminal background checks, also known as “continuous screening” or “infinity background screening,” have been shown to be effective risk management tools for companies and a major deterrent against potential fraud.

“The ‘employee from hell’ can kill a business in a New York minute,” Connell says. “Pre-employment screening reduces the risk of a bad hiring decision; post-employment screening minimizes the risk to which a company is exposed over the long term.”

By hiring a reputable background screening firm such as Accu-Screen, businesses can protect their company from fraud and help ensure their survival during the current economic crisis.

AccuScreen

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