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Insider Fraud: Are Fraudsters Lurking Around Your Office in Disguise?

Posted October 29, 2015 by Lynn Brown


With Halloween around the corner, it's a good time to think about whether there are fraudsters lurking around in disguise in your workplace?

The 2013/2014 Global Fraud Report by Kroll showed that almost 3/4 of those surveyed said that their company has been hit by a fraud involving at least one insider in a leading role.

Every year, in fact, the typical organization loses 5% of its revenues to office fraud.

What does an insider fraudster look like according to research?  

Regular people – Insider fraudsters don’t wear masks and dark clothing. The 2014 Report to the Nations on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE) showed that only 5% had been convicted of a fraud-related offense prior to committing the crimes. They’re first-timers for the most part.    

Committed employees – Most fraudsters work for their employers for years before they begin to steal, said ACFE. In the research, 53% had been with their organizations for more than five years. In general, fraudsters are well educated and respected in the community.

Working in certain departments – 77% of occupational fraud originates in accounting, operations, sales, executive/upper management, customer service, purchasing and finance.

In a managerial position – Fraudsters were managers in 36% of cases in the AFCE study. According to the Insider Fraud in Financial Services report by Software Engineering Institute, managers can alter business processes, may have irregular requests of subordinates, and may have unexplained financial gain.

Working at other levels too – AFCE said that in 42% of cases, regular employees were fraudsters. In the Insider Fraud report, customer service reps, help desk employees, accountants, and bank tellers were most likely to commit fraud. C-suite level executives also commit fraud.

Exhibiting warning signs – Living beyond their means and having unusually close associations with vendors or customers are common red flags. Others include: high debt, investment losses, and resentment towards the employer for being overworked, underpaid or passed over for promotion. “Sometimes the first sign of fraud is just a feeling that something is not quite right,” said Bill Barrett in a paper titled: Inside the Mind of the White-Collar Criminal.

A machine – The Kroll report put the spotlight on the rise in cyber fraud as business activity increasingly goes digital.  

How can a company reduce fraud risk?

  • Create a positive and ethical environment that starts at the top and provides a culture of security and corporate-wide core values.
  • Teach employees the warning signs of fraud in ongoing security awareness training.
  • Provide an anonymous tips line for employees. Whistle-blowers are the most common way that occupational fraud schemes are detected.
  • Develop a response plan that includes insider incidents.
  • Reduce opportunities for organizational fraud to occur. Use surveillance procedures, periodic job rotation, and mandatory vacation. Monitor pressures on employees too, said Barrett. Create secure work policies that reduce the risk of an information breach. For example, restrict access to personally identifiable information, and partner with a reliable document destruction company for best practices in document security.

Put this one simple security policy in place to reduce the risk of insider fraud. Learn how secure paper shredding services can help you protect your information. 


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