A series on all the ways to commit fraud and successfully avoid detection could seemingly go on into infinity. There are quite literally hundreds (and probably thousands) of red flags of fraud in the corporate setting. The key to being successful at fraud is not only committing the theft, but effectively covering it up without giving any hints to management.
A employee engaged in a long-running internal fraud scheme should never take a vacation and never get sick. Absences from the workplace create opportunities for the discovery of fraud, and if you’re not there, you can’t stop or control anything. A day off here or there isn’t too bad, because you can usually get people to leave your desk and your work alone for a week.
More than a couple of days off is bad, though, because your manager will probably want someone to pick up some of your duties while you’re gone. They might go through your files and records. They might receive a phone call related to the fraud. All sorts of things could go wrong when someone else is nosing around in your work!
Imagine having a customer call to dispute an account balance while you’re gone. Oops… that was the account that you forgot to “adjust” before the account statements went out. Now you’re gone for a week, and while you’re gone, someone researches is and tells the customer that no payment was received on the last statement. The customer has a canceled check that proves payment was made…. Uh-oh. Now things are starting to unravel.
Another scary possibility is that the company figures out money is missing and starts looking back through the daily transactions. Someone sees that when you’re at work, cash balances look low. When you’re gone, cash balances are up. Busted! It won’t take much looking to verify that when you’re around, money is missing.
So you wouldn’t want to take a week or two off. That’s too long to be away from work and not have control over records. You need to be there to continue the cover-up.
The best thefts occur in small amounts. Of course, the long-term goal is to steal as much as possible. But if you do it little by little, you reduce your chance of detection. Checks written for large, round dollar amounts can raise suspicions. Break the amount up into smaller amounts with odd dollars and cents. This will draw less attention ot the transactions.
You should also try to find out what the auditors use as their “scope” when examining the company’s financial statement. Any transaction under that dollar amount will almost certainly not be examined by the auditors. Steal less than that each time, and you’re likely in the clear.
Do not engage in any suspicious computer activity. This includes logging in from home in the middle of the night, trying to crack the passwords of other employees, or logging in as other employees from your computer. There is software that tracks all of these things, and there will easily be a trail that leads back to you.
Do not involve other employees in your scheme. Yes, you may be able to steal more if someone else helps. It makes it easier to cover your tracks if another person, strategically placed within the company, helps with the cover-up. The problem is that you have to hope that the other person doesn’t tell anyone or doesn’t mess up.
You also shouldn’t tell anyone outside of the company about your fraud scheme. Would you really want your future ex-wife to go to management and spill the beans on your theft? So you want a gossiping friend to tell the wrong person about your scam. As hard as it may be to keep your successful fraud to yourself, it is imperative that you keep it secret for the longevity of the scheme.
The key to a successful, longstanding fraud scheme lies in being discreet and not drawing attention to yourself. You don’t want to give management or the auditors any reason to look more closely at your work.
Company owners and managers would do well to make themselves keenly aware of some of these most basic personal red flags of fraud. By knowing what warning signs to look for in employees, companies will be better able to prevent and detect fraud.