Archive for the ‘Employee Crime’ Category

Employers: Should Employers Be Suspicious of All Employees?

Thursday, July 26th, 2012

employee background checks, pre-employment screeningHow can you tell which are the trustworthy employees in your company, and which are potential thieves? The news is filled with stories of companies who have been victimized by seemingly great workers—the ones who are always on time, helpful and friendly, who are also skimming cash out of the register or taking merchandise home every night.

Most business owners don’t realize they’re vulnerable until it’s too late. In fact, the Association of Fraud Examiners released a report stating that typically, employee fraud continues for 18 months before it’s discovered.

Employee fraud affects more companies than you might expect. And since 87% of these acts are committed by first-time offenders, pre-employment screening won’t always help. That doesn’t mean it’s not necessary for helping employers determine whether a prospective employee is a good fit, based on criminal background and credit history. But it is possible for a person with a clean record to be hired, only to commit fraud on the job.

Employee fraud might entail falsifying payroll records, embezzling from company bank accounts, taking a few dollars out of the cash register on a regular basis, stealing merchandise or helping other employees cheat the company by covering up their actions.

How can business owners protect themselves from employee fraud? Should you be suspicious of all employees? No, but keep in mind the three factors that must be present for fraud to occur: motivation, opportunity and rationalization. Some employees are motivated by greed; others, by need. Know your employees. Listen to their problems. Does one have a child with a drug problem? Does another have a gambling addiction?

Then, keep your eyes and ears open at all times to make sure your employees with motivation don’t have the opportunity to steal. Implement proper controls, such as dual signatures on checks. Keep tight controls on access to cash, and never allow the same person who counts the money to also deposit it in the bank.

Finally, eliminate the possibility for rationalization. If you are skimming cash from the register yourself, what does that say to your employees? And what about the employer who brags about cheating on his or her taxes? Some employees who commit fraud think it’s okay to steal from an employer they perceive as “rich,” or whom they feel is underpaying them. This isn’t to say that you need to pay employees high wages to prevent stealing, but paying them fair wages—and never bragging about your own financial situation—can help eliminate the rationalization of thieves.

If employees like and trust you, and feel respected and trusted, they are less likely to commit fraud.

When hiring new employees, be sure to conduct proper background screening. The best pre-employment screening process includes employee background checks, employee credit checks, and criminal background checks. You’ll know you’re hiring safe when you screen employees before offering a position.

Be on Alert for Phony Drivers Licenses

Friday, July 20th, 2012

background screening, employee credit checkWhat if that new employee you just hired is not who he or she said she was? Or if a long-term employee is found to be an imposter? Every day, all across the country, employees are hired with fake drivers licenses. In some cases, employers knowingly hire illegal immigrants or other individuals with phony identification, but in most cases, the employer doesn’t know until something bad happens.

Employers are required to complete a federal form (the I-9 form) and obtain two types of identification from new employees. Most often, they receive a drivers license and Social Security Card. Employers can call the Social Security Administration to verify a Social Security Number, but will only be told whether the card is valid and the name and SSN match. There is no way for an employer to know if the card or identity is stolen.

Some employees are using phony drivers licenses or other identification to establish identity for a new job. Fake IDs are a big business. Dozens of online sources brag that they can help you establish a new identity, with a “real government-issued ID under another identity.” And the news is full of state Department of Motor Vehicle employees being arrested for providing licenses to ineligible citizens.

Employers can partner with local police to learn how to spot fake identification, and about the latest trends in ID forgery.

Fake identification is a real problem. But increasingly, criminals and others with something to hide are obtaining real drivers licenses with fake names.

In Minnesota, the Homeland Security Department is investigating 10,000 cases of possible fraud. 18 people were recently arrested and several have been indicted. One woman with a legitimate drivers license under a false name obtained a U.S. passport as well. She also once worked for the Minnesota Secretary of State’s Office, again under the false name.

When Homeland Security gets involved, you know it’s serious. Hopefully, federal and state government agencies will help employers safeguard against individuals who apply for jobs using real, state-issued identification. They could be hiding criminal records, or other incidents in their pasts that expose employers to liability and potential danger.

When hiring new employees, it’s imperative to conduct a thorough background check, credit check and employment verification through a trusted pre-employment screening service. Be alert, learn what to look for in phony identification, and always verify an applicant’s information.

Terminating an Employee for Theft

Thursday, March 29th, 2012

employeescreeningblog, employee screening, pre-employment screeningWe’ve been talking lately about employee theft, and how it affects employers of all kinds. In this third article in our series, we look at what to do when you’re faced with this unfortunate situation.

The most sophisticated video camera systems won’t stop an employee from stealing. And unfortunately, the evidence they contain won’t always protect you from an unlawful termination suit. Even the most blatant thieves may try to protect themselves by bringing a lawsuit—and even if you win, you’ll still have to expend a great deal of time and effort.

You cannot avoid all the unpleasantries of terminating an employee, but if someone is stealing, you cannot let it continue, either. If you fear that employees are stealing from your business, keep the following dos and don’ts in mind:

  • Before you take action, take the time to do a thorough investigation. Accusing an employee is a serious charge, and you’ll need to thoroughly document your case. So don’t fire someone in the heat of the moment.
  • Do have at least two people involved in the investigation to avoid false accusations by the employee of framing for retaliation or bullying.
  • When conducting your investigation, don’t resort to crime-movie tactics. By law, you cannot go through an employee’s personal belongings, or use a baby monitor to listen to their private conversations.
  • Be careful of what you say. Stating a fact, such as “Steven stole $600 worth of merchandise,” can subject you to accusations of slander. Do state things in terms of opinion: “We have reason to believe that Steven may have taken the merchandise.” Even if it’s true that Steven stole the merchandise, you could still be sued.
  • Be sure you can prove the reasons for termination. Do terminate for performance or failing to follow company procedures, instead of for theft that could possibly be explained by the employee—however weak the explanation may be.
  • If an employee admits to theft, don’t terminate until you have obtained a written statement in his or her handwriting. If the employee wishes, do allow this to happen in private, to avoid any accusation of coercion.

Legal disclaimer:

The contents of this article are intended for general information only, and should not be relied upon as a substitute for obtaining professional legal advice applicable to your situation.

Are You Vulnerable to Employee Theft?

Friday, March 23rd, 2012

employment screening, employee background check, pre-employment screeningLast week, we reported on employee theft in retailing, and a recent report that stated that more losses occur due to employee theft than to than to shoplifters.

Any business is vulnerable to theft by employees, whether you’re selling widgets or washing machines. You don’t even have to be in the business of selling merchandise to be victimized by employees who steal.

Here are some examples of what dishonest employees may take out the door:

Trade Secrets: Employers who build successful businesses have done so because they do things a certain way, or offer a service or product that people want. If you’ve “built a better mousetrap” by instituting procedures or systems that work, your competition will likely want to know how you did it. What better way to find out than through an employee or former employee? And often, employees leave to start their own competing businesses, built on the successful model someone else worked hard to create.

Unearned pay: Employees with access to payroll systems can falsify work records to generate higher paychecks for themselves or their buddies.

Sensitive Data: Your company files are a treasure trove for identity thieves. Sensitive information like social security numbers, credit card numbers, birthdates and family information can help identity thieves access credit and wreck your or your employees’ finances.

Money: Countless businesses are victimized by employees—from unscrupulous bookkeepers to petty thieves—who skim cash out of the bank account or cash register. Watch for issues around drug or alcohol abuse, or complaints about not getting paid enough. If an employee’s lifestyle changes, with frequent purchases of expensive items or vacations, take a close look at your books. Be careful to conduct all due diligence before making any accusations.

Productivity: If your employees are average, they may be visiting social media sites or conducting personal business on the clock, causing you a loss of productivity.

Workplace theft is a serious problem for employers. The best guards against it are strong policies and procedures that are backed up by action. Stay on top of what’s going on in your business and immediately deal with any infractions of your theft policies. When other employees see theft is not tolerated, they’ll get the message.

Employee Theft Hits Retailers Hard

Thursday, March 15th, 2012

employee background check, pre-employment screening, criminal background checkNationwide, retailers are feeling the pain of big losses due to theft—and it’s not all from shoplifters. More losses occur due to their own employees than to shoplifters, or even organized crime, according to a recent report.

The National Retail Security Survey (NRSS) revealed that in 2010, shoplifting and organized retail crime accounted for about 31% of inventory shrinkage, while thefts by employees made up a whopping 45% of losses. Another 14% of shrinkage was due to administrative error, while vendor fraud was 4% of the total.

News reports are full of employees stealing clothing, perfume, cosmetics, athletic shoes, housewares and sporting goods, and selling it on eBay, Craig’s list and other websites. In other cases, office employees with access to cash are often charged with embezzlement, or cashiers are accused of loading store debit and credit cards with cash amounts.

According to the NRSS survey, about half of gift card losses were due to dishonest employees in 2010. And it seems employees are working together to rip off their employers: the report states about 18% of internal theft cases involved collusion. Some collaborate to ring up purchases for less than the regular price, then return the merchandise later, pocketing the full amount in cash.

With sophisticated cameras and anti-theft devices, how can employees get away with stealing so much inventory from retailers? The answer is not an easy one. Each time new technology is developed, it seems, someone finds a way to circumvent it.

Loss prevention experts say employee theft is all about “opportunity.” Controlling opportunities helps cut down employee theft. Setting standards, using controls and watching employees who are suspected of wrongdoing are all important.

With the average employee theft case totaling $996, compared to shoplifting cases averaging $337, retailers have the incentive to prevent employee theft whenever possible. One way to help protect any business from employee theft is to know the background and criminal history on each new hire, by conducting thorough background checks and pre-employment screening!

Employee Theft Rises in Bad Economy

Thursday, December 1st, 2011

employee screening, employee pre-screening, employee credit checkThe stories of trusted, long-term employees charged with embezzling money from their employers just keep coming:

  • There’s the case of the bookkeeper who was charged with stealing over $100,000 from a concrete company. In a plea deal, she pleaded guilty to embezzling $5,000, got a 45-day sentence and was ordered to pay $50,000 in restitution. Then she went to work for a department store and stole $17,000 worth of merchandise and gift cards. Maybe that’s how she planned to pay the restitution.
  • Another bookkeeper took trips, bought expensive cars and had plastic surgery – while making about $20,000 in salary. Still another worked for a couple for 30 years, taking money all the while. His $1 million theft was only found out when the business owners wanted to sell the company and retire.

Unfortunately, these types of fraudulent activities by employees are not unusual. We just don’t hear about the thousands of incidents that go away quietly. Many stories are never reported to the press, because they are not reported to the police. Whether out of embarrassment or fear of harming their business, many companies deal with these crimes on their own.

But the publicity can be helpful to other small businesses, since they are the most likely to be victimized. With one person responsible for writing checks, making bank deposits and reconciling statements, fraud is much more likely. Splitting these duties reduces the risk, but small companies often cannot afford the extra personnel. Hiring an outside bookkeeper is one way to alleviate the problem.

Why do employees steal? They usually have three traits: opportunity, need and rationalization. It could look like this: Your cashier figures out a way to take money that you’ll never notice. He’s behind on his rent and needs cash. And besides, he works really hard and you don’t pay him enough. He gets away with it, so he does it again. And again. And before you know it, you’ve lost $20,000. You never imagined this person would do anything like this. Chances are, he never has before.

If your company is victimized by an employee, reporting the crime can protect other businesses. When employees are properly screened prior to being hired, a criminal background check will reveal any previous convictions. And when you’re ready to hire, make sure to run pre-employment background checks and credit checks—especially when you’re hiring a bookkeeper, cashier or any other position that has access to cash or bank information.