Don't Ignore the Warning Signs
During the course of more than a decade investigating white collar crime, we have identified common themes that are associated with most fraud cases we've investigated. It is important to understand and heed these red flags, but it is also important to note that these red flags do not constitute "proof" of actual fraud. It takes documents and information to prove any fraud case.
1. Employee is the most well-liked & trusted in the organization
Don't get us wrong, we understand the importance of loyal and trusted employees. However, we have also found that fraudsters tend to be one of the most trusted and well-liked staff member in the organization. They use their ability to be liked and trusted to perpetrate their crimes.

All employees should understand that their work is subject to question and scrutiny on a regular basis. This keeps your assets safe, and your employees safe in their jobs.

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2. Refuse to provide basic financial information
Perhaps you have been asking to look at basic financial information like financial reports, bank reconciliations, or bank statements. Perhaps your accountant or auditors have been asking for information necessary for your annual tax return, audit, or bank loan update. Perhaps you have a new consultant or a software system you are trying to implement and information necessary to advance this project is being stalled by a key employee.

When someone is refusing to provide basic financial information that should be available "at the push of a button," heed this as a warning that there could be something the key employee doesn't want you to find. It could be as simple as they don't have their work done and don't want you to know about it. Unfortunately, it is often a sign that there is an underlying theft scheme that could be uncovered with the documents they are failing to provide.

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3. "Offended" when questions are asked of them
Let's face it, you're a nice person. But, when you ask questions of this employee and/or ask for basic financial information, and you are met with push-back or worse, you're accused of insulting them, that is often a red flag or fraud. Nice people do not want to upset or offend other people. So, what do most people do in that situation? They tend to back off!

We recently worked a case where a few new board members were asking for basic information from the treasurer and she wouldn't provide it, claiming she was a busy mom who didn't have time. When they pressed for the basic information, she called friendly members of the board telling them that the new board members were "bullying her". The new board members were asked to back off, and they did, not wanting to "be the bad guys." Unbeknownst to everyone, the treasurer had been stealing the organization's cash for more than a year and she knew the review of the bank statements and other financial information would reveal a significant drop in revenue.

We understand that some people are very emotionally attached to their jobs and do not like to be questioned about their efforts. Fraudsters employ similar tactics to keep others from looking at documents or information. This is why it is critically important to obtain documents to determine whether you have a behavior problem or a fraud problem.

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4. Employee rarely absent; refuses to take vacations
A fraudster needs to have control. Control over mail, incoming phone calls, the accounting system, and more. As a result, they often do not take personal time off.

We have worked countless fraud cases where the suspect had gone years without so much as one day off. Again, this red flag was looked at as a sign of a loyal employee instead of what it really was - the sign of a potential fraud scheme.

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5. Employee works long hours and/or when others are not present
Similar to not taking days off, another red flag is the employee who is the first one to work and/or the last one to leave. Again, a sign to most employers that this employee is wonderful and loyal!

The question you should ask is, "Do we need to hire another employee to offload some of the burden on this person or is this the sign of a potential fraud?"

Let's face it. It's difficult to do your job, steal money, and cover it up. And most people aren't going to steal while everyone is in the office. So, the fraud occurs when others are away.

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6. Employee refuses to relinquish control
In the event that an employee appears to be overworked and a new employee is hired, a reasonable employee would welcome the assistance.

In the event that cross-training is required so that employees can cover each other during vacations or other absences, a reasonable employee would participate in the cross-training.

Fraudsters will not welcome such assistance or wish to cross-train. As an example, we investigated a fraud where the woman never took vacations, was the first one to work and the last one to leave, and complained about being over-worked! Her employer would hire others to come in and assist and this woman would find reasons to fire these individuals within weeks of their employment. This woman turned out to be engaging in a years-long fraud scheme and knew that her crime would be uncovered by a new employee.

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7. Employee appears to be living beyond means
Homes they can't afford, luxurious cars, jewelry, vacations, clothes, and more. You know what you pay your employee. You probably also have a good idea of what their spouse does for a living. Does this person's lifestyle match your understanding of their income?

In one instance, our client's former accountant was buying beautiful and expensive gifts for co-workers and owners. The woman had a house at the beach, a brand-new vehicle… and two teenage boys at home. She made $15 per hour as a single mother. It was clear that her lifestyle exceeded her income. In nearly every case we've investigated, our interviews have revealed that the suspect's lifestyle did not match the estimated income of their household.

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