White Collar Crimes - Signs of Employee Theft

White Collar Crimes – Signs of Employee Theft

White-collar crime is associated with crimes committed by someone of a higher-level social class.” – Wikipedia

This is the type of crime which happens a lot less than blue-collar crimes, BUT this is the one that will probably cost you the most, simply because the offenders are normally employed in a position of trust. – They are the ones employed to check up on others…

“Power corrupts; absolute power corrupts absolutely.” – John Emerich Edward Dalberg Acton

As mentioned earlier this is the crimes that if allowed to continue, will close a business’ doors. Employers and business owners need to be very vigilant and regularly do independent checks.

Employees in this group include –
  • Directors in bigger companies
  • Bookkeepers
  • Branch Managers
  • Marketing Managers and Employees
  • Credit Controllers
  • Debtors and Creditors Clerks
  • Stock-Controllers
Signs that there might be problems in a business include –

Required profit margins are not met –

  • Maintaining pre-determined profit margins is important in any business. Anyone deviating from it need to have an incredibly good reason, otherwise, the deviation makes no sense. (Lower mark-ups on extremely big orders would be a good reason.)
    • Business can many times be challenging and to keep the doors open the business many times are forced to lower profit margins for a period. However, if your business continuously fails to meet profit margins there is a problem.
    • We have seen extremely complicated dishonest invoicing, where clients would be invoiced exceptionally low prices for products in return for paying the employee a bribe on the side, which is in investigation terminology referred to as “soft commission.”
    • Where a business has more than one salesperson it is important to regularly check the performance of individuals as many times one salesperson’s healthy margins will be subsidising another’s dishonesty.

Accounting Confusion –

  • A Scotland Yard Investigator in his presentation during a training session shared his unique opinion on businesses and fraud. He believed that any business is like a fish tank. If your water is kept clean you can easily spot problems or looming problems. If the water becomes murky, spotting problems becomes difficult and sometimes even impossible. – If a business allows the accounting to be murky, spotting fraud or embezzlement becomes difficult and many times almost impossible.
  • The aim of accounting is to be able to “account for everything”. People trying to create confusion in invoicing, etc., or who try to avoid/bypass control measures might be busy with sinister plans. If this happens regularly you might want to investigate the person…

Too many accounting discrepancies –

  • The most difficult task in embezzlement and fraud is getting the money out of the company’s bank account.
  • If an employee has too many issues related to customer credits, you might want to investigate.
  • The other important sings include problems with employee claims. (travelling, accommodation, etc.) An employee who seems to be getting things “mixed-up” too often might be a sign of something you may want to investigate.

Employees living the “high” live –

  • “Keeping up with the Joneses” is something employees in the white-collar group many times falls victims to.
  • There is a fair number of employees for whom everything just seems to fall right in life. When they invest, they make the highest possible profits. When they sell a property, they make the maximum amount of money, etc. Unfortunately, in this white-collar group this very thing many times lead to jealousy. Employees who keep on making the “wrong” choices may at some stage start looking for funding to get them out of a situation. This many times lead to employees getting involved in fraud, embezzlement, and other stupid things.
  • Without become obsessed, do not always assume someone is just lucky and blessed. Question and checks things from time to time. Apart from it being a possible deterrence, it might reveal the early stages of a big problem developing.

Financial Strain on Employees –

  • Most employees from time to time face debts. – If they carefully manage their budgets, they can pay for everything.
  • Unfortunately, life happens, and people make stupid choices. Receiving calls from debt collectors/attorneys many times forces the most honest employees to start considering (dishonest) options to pay their debts.
  • In some of our investigations where millions were stolen over a period, we have uncovered that the first theft was only a couple of hundred or thousand rands from petty cash to pay a debt. When nobody detected the theft, the employee became more confident and the thefts started happening more regularly. This soon turned into stealing even when there was no pressure to pay debts.
  • When you have someone in a senior position (in the white-collar group) who does not answer “private numbers” or often do not answer calls from “strange numbers” you need to be concerned. Running away from problems is only increasing the problem and this soon could lead to that employee facing no other way out but to steal.

Alcohol and Drug Consumption and Socialising after hours –

  • It is normal for employees in the “white-collar fraternity” to socialise.
  • When this starts happening too often, it might become a reason for concern, especially when you have senior and more junior employees in the same group. – Seniority in position is most of the time associated with more senior age groups. People from the same generation have the same interest most of the time. When they start mixing too often there might be a reason. The reason may be 100% innocent, but there might be a reason why the financial director is paying for the drinks of the junior salesperson…

Certain Suppliers/Clients being favoured –

  • Employees in this group are many times in a position where they can decide on credits for clients, who preferred suppliers/service providers will be, etc.
  • As soon as there is a supplier/service provider who keeps on messing up, but an employee insists on using them, there should be concerns…
  • Even where the supplier/service provider does not mess up, the relationship between employees and suppliers/service providers should be closely monitored.
  • We have seen a well-oiled “syndicate-style” operation where a supplier got awarded more than 90% of orders of a big company. This despite them being at least 5% more expensive than the competitors. In our investigation, we had a few people confessing to getting payments from this supplier. As the years went by the payments turned into vouchers from big supermarket groups, paid holidays and more.
  • Where a client is provided extraordinarily good prices and service the relationship should also be monitored. It is every business’ aim to keep clients happy. Where it reaches levels of almost being ridiculous there might be something happening in the background…

Employees who never take leave and is always at work –

  • Any company should appreciate a dedicated employee. Someone who is always willing to work. But when an employee works non-stop year in and year out, there is a reason for concern.
  • Some of the biggest frauds were uncovered within days after an employee was unable to be at work. Many times, employees can coverup shortages and discrepancies only because they allow nobody to check them, which most of the time means that they cannot miss a day at work.
  • If you have an employee that is too dedicated, you should be concerned.

Employees in “Competition” with the Employer –

  • Many employers have staff discount on products as an incentive to employees. (The aim is to provide employees with a benefit. Unfortunately, many employees then start selling these products to others, which is in direct competition with the employer.)
  • Employees in the white-collar group normally have a lot more responsibilities than someone working as for example a cleaner. If a cleaner sells products which was bought at “staff-discount prices” one can expect that they have time to do it. In contradiction to this, a company’s financial director has way less time to sell products as a “side-line”. Where a company is in the service industry this becomes even more dangerous, as many employees may be forced to “steal” company time to provide services, and even and take shortcuts to make an extra few bucks.
  • As good an idea it might sound to give staff discount, it almost always leads to problems, and employers are advised not to do it.

Copyright Protected. Compiled by Willem van Romburgh April 2020

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