Unfortunately for businesses, workplace theft appears to be an increasingly common problem.
The 2022 Report to the Nations, from the Association of Certified Fraud Examiners (ACFE) showed that individuals who committed occupational fraud are being caught faster and causing smaller losses. Median losses have dropped by 16% in the last decade, while the median duration has fallen by 33% in the same period.
However, the percentage of cases involving corruption continues to rise, having increased from 33% in 2012 to 50% in 2022. Last year, at least $3.6 billion was caused in total losses, with organizations estimated to lose 5% of revenue to fraud each year. The report also revealed:
- 42% of frauds were detected by tips, over half of which came from other employees
- Businesses with the fewest employees had the highest median loss at $150,000
- Just 6% of perpetrators had a prior fraud conviction
- Nearly half of all occupational frauds came from four departments: operations, accounting, sales and upper management
- A typical fraud case causes a loss of $8,300 per month and lasts a whole year before detection
Employers should be well-versed in how to identify and prevent employees stealing from their company. However, to do so, they first need to understand the different types of theft that staff can engage in.
1. Data theft
Data theft might include stealing trade secrets, proprietary information, customer and contact lists, or even other employees’ personal information, when leaving the company. This form of fraud isn’t uncommon, with up to three-quarters of organizations reporting having experienced theft in this way.
Not only does it put an organization’s assets at risk, but it could also expose confidential information about your clients and customers.
2. Money theft
Stealing cash is most frequent in businesses that deal with physical money, such as retail and hospitality. This might include stealing directly from the cash register, skimming a transaction or overcharging a customer and then taking the difference.
3. Payroll theft
Payroll theft concerns employees that carry out financial tasks and have access to their colleagues’ paychecks. They may either cash these for themselves, or create fictitious checks.
4. Time theft
This is what happens when an employee is paid for time in which they weren’t working. It’s especially prominent for professionals that work from home and those who are paid by the hour.
5. Inventory theft
When an employee steals a product from their employer. This could be for personal use, or with the intent to sell, which is common with medical and technological products.
There are a wide range of reasons that may compel employees to commit theft. Here are some of the most common.
Sometimes, employees feel like they’re not treated well or respected by senior leaders. Consequently, they may seek some form of revenge. This could occur through disputes, feeling a manager is displaying favoritism, harassment or just failed relationships with colleagues and senior staff.
Unexpected medical bills, legal expenses and inflated loan repayments are just a few of the external problems that might rise for employees, leading them to attempt to steal from their employer.
Limited theft prevention measures
If employees become aware that their organization has significant security weaknesses, they’re much more likely to attempt theft. Some will try it simply because they think they’ll get away with it, while others will compare the potential consequences and rewards. Either way, failing to have anti-theft measures in place isn’t a risk worth taking for any business.
Although a good company culture is rooted in trust, that alone isn’t enough to guarantee employee theft won’t occur. Staff will generally demonstrate ‘red flags’ before committing the crime, so here are some of the biggest indicators to look out for:
- Working regularly outside of business hours
- Defensiveness when reporting back on tasks
- A lifestyle that is unusual for their salary
- Refusing to hand over tasks to other employees
- Unwarranted complaints about the company
- Weak performance
- An unusually close association with a specific vendor or customer
Key findings from the research showed 2,110 cases of occupational fraud during the survey period, spanning 133 countries. The total loss for businesses was more than $3.6 billion, with the average loss per case being just under $1.8 million.
Some of the various forms of occupational fraud highlighted by the ACFE report include:
- Creating fraudulent physical documents
- Altering physical documents
- Creating fraudulent electronic documents or files
- Destroying or withholding physical documents
57% of all cases involved the creation of fraudulent evidence, while 38% involved concealment methods affecting both physical and electronic evidence.
As far as the triggers for these infringements are concerned, the research showed that bad experiences at work could increase the likelihood of people committing occupational fraud. The report described events such as poor performance evaluations, demotions, involuntary cuts in hours and pay reductions as "HR-related red flags".
Of all fraudsters, 85% displayed at least one behavioral red flag before committing theft. The most common sign was employees living beyond their means, followed by those experiencing financial difficulties and individuals displaying unusually close associations with specific vendors or customers.
The blurring of the boundaries between work and home life is another potential factor. If people spend a lot of time working from home, for example, they might think it's more acceptable to take workplace supplies home without checking with their employer first.
Theft is a criminal offence, so there may be circumstances where police involvement is necessary to fully resolve the matter. However, HR should also investigate themselves and, to avoid wasting the time of the authorities if the accusation is insubstantial, a discipline action may be a more appropriate option.
Can you use CCTV and secret recordings?
Employers are usually permitted to use CCTV where there is a legitimate business reason. For example, if it helps with an investigation into suspected theft. However, excessive monitoring of employees will most-often be badly received by your workforce, creating feelings of mistrust.
You also need to have policies that outline exactly how any footage you capture will be used, as the Data Protection Act forbids the use of CCTV footage for any reason that hasn’t been disclosed to all employees.
Can I dismiss an employee on suspicion of theft?
The simple answer is that you shouldn’t dismiss an employee if you can’t be certain it was them that committed the theft. If you have a reasonable belief and follow it up with an investigation, the decision can be tricky.
If that particular member of staff is the only one left in the frame when your investigation has concluded, you can dismiss them. Conversely, if there are multiple employees that could have possibly committed the crime, you would have to either dismiss all of them, or none of them.
How do you investigate workplace theft
When you hear a suggestion that theft may have occurred, the most important thing is to be as discreet as possible in your investigation at the beginning. The last thing you want is for the alleged perpetrator to get word of what you're doing and either destroy any evidence or run, potentially taking more before their departure.
What's more, rumors that HR are investigating a theft in the workplace of any sort is likely to spark paranoia between colleagues, creating low morale and a difficult working environment for everyone.
If you don't have a suspect and just missing items, it's crucial that you consider everyone in your investigation and that each employee undergoes the same level of scrutiny. Not doing so will leave the company open to complaints of bias or prejudice.
You may also want to change certain systems to either expose the thief or at least prevent them from stealing anything further. This can include access to certain information, resetting passwords, or even out-of-hours building access. Implementing small changes that make the theft trickier can be enough to deter stealing in future and can even encourage the perpetrator to own up or get caught.
There are a number of ways that HR and business leaders can work to prevent stealing in the workplace, but looking for sudden changes in behavior can be the most noticeable. However, to do this to the organization's full ability, HR must work alongside the managerial team to identify any disruption to normal employee conduct. This may be working unusual hours, unwillingness to work with others or just a sudden change in character.
Here are several ways to help ensure you stop employee theft:
1. Screen new hires
You can also reduce your exposure to these issues by introducing rigorous screening methods during the recruitment process. Verifying references, finding out why job applicants left their last few roles and conducting criminal record checks can help you ensure you're taking on responsible, honest people.
This is just as important for temporary workers as it is for permanent recruits. People hired on short-term contracts could even pose a higher risk of theft, as they might feel less invested in the organization and its financial wellbeing.
Ultimately, it's essential that everyone employed by the business - regardless of the length of their contract, their level of seniority or the department they work in - understands the importance of this issue and the company's stance on it.
2. Maintain positive relationships
Given the significance of the HR 'red flags' highlighted by ACFE, one of the most important things you can do to reduce the risk of workforce theft is work hard to maintain positive relationships with employees.
This could be particularly crucial if someone has just received a poor evaluation, or if the company has been forced to cut hours or pay for some employees. In these scenarios, positive intervention from the HR department could prove vital to keep up morale and minimize the risk of theft and other types of fraud.
3. Remain vigilant
As well as maintaining their own performance standards, employees should be encouraged to stay vigilant to possible misconduct by others, and given dedicated (possibly anonymous) channels to report concerns to their superiors.
4. Establish your policy
It’s important to include an anti-theft policy within your employee agreement to signify any form of theft will be met with zero-tolerance. Add some examples of prohibited actions and behaviors while informing your staff that they will face severe consequences if in violation of the agreement.
5. Security surveillance
Many businesses have cameras installed on-site, which not only leads to increased security, but also can reduce insurance premiums and potentially cover the cost of setting them up in the first place. Make sure to make staff aware of them and avoid putting cameras in areas where privacy is required, such as bathrooms.
6. Restrict access permissions
The principle of least privilege is used by many organizations to ensure only the individuals who require access to sensitive information are given such privileges. For example, if all employees have access to the administrator group on their devices, there’s a much higher chance of one individual downloading classified information onto a removable drive, or uploading malicious software and applications.
7. Carry out regular audits
This means reviewing your financial records to ensure they’re accurate. Internal audits are intended to identify problems like incorrect data or missing money. Conducting these regularly puts you in a better position to spot theft, especially if an employee has been altering records, skimming or outright stealing. The more audits you do, the faster you can see problems.
8. Interview your workforce to gather evidence
A great way to prevent theft is by creating an environment in which employees know all allegations will be taken seriously and investigated accordingly. Whistleblowing helps businesses, as deciding to report fraudulent behavior in the workplace is a significant decision. There has, in the past, been a stigma around it, but reinforcement is vital. Train your employees on your policies and make sure they’re comfortable with transparency.
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