The newsLINK Group - Embezzlement and Employee Theft

Editorial Library Category: General Business Topics: Embezzlement, Employee Theft Title: Embezzlement and Employee Theft (Small Business) Author: newsLINK Staff Synopsis: Embezzlement is a bigger problem for U.S. businesses than you might realize, and it can go on undetected at a small business for a long time. Small businesses are particularly vulnerable for a number of reasons. Editorial: Embezzlement and Employee Theft (Small Business) 4064 South Highland Drive, Millcreek, Utah 84124 │ │ (v) 801.676.9722 │ (tf) 855.747.4003 │ (f) 801.742.5803 Editorial Library | © The newsLINK Group LLC 1 The Scope of the Problem Embezzlement is a bigger problem for U.S. businesses than you might realize, and it can go on undetected at a small business for a long time. Small businesses are particularly vulnerable for a number of reasons: Embezzlement is a crime of opportunity. It can’t occur anywhere that doesn’t have money. That makes any small business a natural target. People increasingly expect online access to businesses through the Internet, opening the door to cybercrime. In turn, sophisticated new methods for stealing money make it easier for criminals to succeed in robbing a business, and harder for the business to stop them. Small businesses don’t have the same resources as larger businesses when it comes to the latest tools for Internet security. In addition, state and federal laws have not yet caught up with this rapidly changing area. According to Christopher T. Marquet, the author of a 2011 report on embezzlement, 2010 was a bad year because there was a 17 percent increase in embezzlement crime when compared to the year before. Marquet International, Ltd. is a business located in Boston, Massachusetts that was founded at the beginning of 2006 and specializes in investigations. The company publishes an annual embezzlement report that focuses on new cases where approximately $100,000 or more has been embezzled. The results of the study were published in January 2011 and reported o n . The study analyzed 485 specific cases and offered the following conclusions: The average loss was almost $1 million. Most of the embezzlers took the money by either forging checks or writing unauthorized checks. People whose jobs included finance and accounting responsibilities were the most likely to embezzle funds; they accounted for two-thirds of the cases. Women were more likely to embezzle than men. Again, they were the instigator in two-thirds of the cases. Most embezzlement schemes went on for 4.5 years before anyone noticed that the money was gone, and shouldn’t have been. Almost 20 percent of the businesses that were victimized were financial ones. You should also know the following: Employees who embezzle are acting alone 84 percent of the time. Once the money is gone, chances are good you won’t be able to recover it. Specifically, 60 to 80 percent of all businesses that are embezzled never recover any money. Prevention Is the Best Remedy Ruth S. Crane, President of Auditors Inc., has a rule about embezzlement called the 10-10-80 rule: ten percent of the people who work for you will never steal; ten percent will always steal; and 80 percent will only steal under specific circumstances. Of course, as an employer, you can be careful who you hire. You may choose to have civil, criminal, and credit checks performed; some businesses also have their employees bonded. But these steps only tell you what someone has done in the past. Credit checks are particularly helpful because people who are dealing with financial problems are more likely to commit fraud than someone on a firm financial footing. If one or more employees handle money, it is entirely reasonable to make sure you are not tempting any of them to solve financial problems through a little creative embezzlement. You aren’t going to be able to stop people from embezzling, but you can at least reduce the likelihood of it happening by not hiring the ten percent who would always steal and discouraging the 80 percent who would only steal under particular circumstances. The best idea is to minimize opportunity. Embezzlement is an opportunistic crime. People