Insider fraud


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Insider fraud or Asset Misappropriation schemes include:

Check Forgery - An employee forges a signature on a check made out to himself/herself or to someone else.

Check Kiting - An employee writes checks on an account that doesn’t have sufficient funds with the expectation that the funds will be in the account before the check clears.

Check Tampering - An employee alters the payee, amount or other details on a check or creates an unauthorized check.

Inventory Theft - An employee steals product from a company, either by physically taking it or diverting it in some other way.

Theft of Cash - Most common in retail environments where cash exchanges are common, this type of fraud covers simply:
  • Stealing cash
  • Not registering a sale and pocketing the cash.
  • Return fraud (an employee colludes with someone else to return goods fraudulently for a refund)
Theft of Services - An employee misuses company services or company-funded services.

Expense Reimbursement Fraud - Also called expense fraud, this type of fraud includes:
  • Forging receipts - Double claiming for expenses
  • Submitting false reimbursement claims
  • Inflated expense claims
Procurement Fraud - This type of fraud includes schemes such as over-ordering product then returning some and pocketing the refund, purchase order fraud where the employee sets up a phantom vendor account into which are paid fraudulent invoices, or initiating the purchase of goods for personal use

Payment Fraud - This can include vendor fraud schemes as well as creating false customer accounts to generate false payments.

It also includes:
  • Altering payee details on checks and payables
  • Self-authorizing payments
  • Colluding with others to process false claims for benefits or payments
Workers’ Compensation Fraud - In these types of fraud, an employee exaggerates injuries or a disability, invents injuries that did not occur or attributes injuries that occurred outside of the work environment to work to receive compensation pay.  Employees also commit workers’ compensation fraud when they lie about their health or work status while receiving compensation.

Health Insurance Fraud - An employee conspires or colludes with health care providers to defraud an insurance company by submitting false or inflated receipts. An employee claims a reimbursement for medical or health services not received.

Commission Fraud - An employee inflates sales numbers to receive higher commissions, falsifies sales that did not occur or colludes with customers to record and collect commissions on falsified sales.

Personal Use of Company Vehicle - This is similar to theft of services, but involves the employee using a company vehicle (and often the company-issued credit card for fuel) for unauthorized personal activities.

To prevent and detect asset misappropriation:

  1. Conduct thorough background checks on new employees.
  2. Implement checks and balances.
  3. Separate the functions of check preparer and check signer.
  4. Rotate duties of employees in accounts.
  5. Conduct random audits of company accounts.
  6. Don’t pay commission until goods are services have been delivered.
  7. Keep checks in a locked cabinet and destroy voided checks.
  8. Implement an anonymous ethics hotline to encourage employees to report wrongdoing.

eFraud Prevention™, LLC