Employee Fraud Prevention: How to Prevent and Stop Employee Theft in Your Company

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Employee fraud is a consequential problem faced by organizations of all types and sizes around the world. While you would like to believe that your employees are loyal and working for the greater good of the organization (and most of them probably are), there are still many reasons why some employees commit fraud.

According to results from the 2020 Global Economic Crime and Fraud Survey by PwC, it showed that fraud incidents in the Philippines have not diminished in the past two years. Majority of these fraudulent activities amount to an average of $100,000 per organization in a year.

This makes employee fraud a much greater issue in the country. You might be aware that the majority of the businesses in the Philippines are small to medium enterprises, which are more vulnerable to fraud compared to larger corporations.

Losing such a large amount of money can be devastating for small business owners. If not addressed immediately, employee fraud can even lead to bankruptcy.

Additionally, aside from monetary damages, the long-term impact of these incidents contributes to a severe loss of public trust, damage to the brand’s reputation, credit loss, and low company morale.

So, how do you ensure your company doesn’t suffer the same consequences? The answer is simple: through employee fraud prevention.

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What is fraud prevention?

Employee fraud is a disastrous incident. However, you do not have to worry because this can be prevented.

The prevention of fraud and employee theft can be done through the implementation of strategies to detect fraudulent activities, especially transactions and banking actions, and prevent these from causing damage to the finances and reputation of a company.

The most appropriate employee fraud prevention strategies and solutions vary depending on the transactional environment of an organization. However, there are general best practices in fraud prevention and one of the most important is identifying vulnerabilities head on.

This is technique is best conducted by gathering relative information on fraud risks from various sources within the company and industry. By doing this, you can determine the totality of fraud risks threatening the organization, as well as the impact of opportunities, incentives, pressures, and rationalization that lead to fraud.

However, if you want to practice fraud prevention that’s proactive and effective, the best way to pre-empt employee fraud is to start with your hiring process.

For more information and inquiries about employee fraud prevention and preemployment tests, don’t hesitate to contact Aptitude today.

Employee Fraud Prevention Strategies to Use During Recruitment

As they say, an ounce of prevention is better than a pound of cure. When it comes to employee fraud, no truer words have been said. 

Recovering from employee fraud is sometimes nearly impossible, if not incredibly taxing. So, it is best to avoid this problem rather than try to resolve and recover from it. The most effective way to achieve this is to learn how to prevent employee theft, starting from your recruitment process.

Here are some employee fraud prevention strategies your recruitment team can easily implement.

Take Time to Get to Know the Applicant

Each time you hire a new employee, you’re taking a risk. So when you receive an employment application, obtain as much information about the candidate as you can. You can do this by completing the following steps:

  • Validate that an applicant is who they say they are with appropriate documents.
  • Verify that the education and credentials they claim to have on their resume are accurate and tree.
  • Ensure that their police records are clean and that they don’t have disciplinary offenses from their previous employers, especially regarding theft.

You can expedite this process by taking advantage of employee background check services offered by various companies in the Philippines, including Aptitude. This service is beneficial in verifying the following information about an applicant:

  • Identity
  • Credentials
  • Criminal record
  • Financial history

Another thing you can do to make the job recruitment process easier for your team is to hire an employment verification company. This type of organization can assist you in verifying the employment history of a candidate and ensuring that the information indicated on their resume is genuine.

Verify Credit History

For companies in the banking and finance sectors, you should ask your candidates to submit a Veritas Credit Test. This is good practice, regardless of whether or not the individual will be handling cash or money as part of their duties. But this is especially crucial for positions such as treasurers, tellers, and auditors.

If the candidate has credit or financial problems in their personal lives, you can’t rule out the reason that it will bleed into their job and professional performance. After all, you don’t want to be a victim of your employee’s problems.

Call All References

Verify the truth and accuracy of all the information and details on the applicant’s CV or resume. If you uncover any misrepresentation, exaggeration, or outright lies on these documents, stop considering this applicant and move on to the next one.

Being truthful right from the start of the application process is a trait that you should be looking out for. If a candidate lies during the recruitment process, they will most likely lie again once they are hired. To further verify the legitimacy of the information provided by the applicant, you can call the references they provided in their resume or CV.

Educational Background Check

Most employers and HR teams ask for applicants’ educational backgrounds and degrees. However, very few recruiters actually call the college or university to verify the legitimacy of the information provided by the candidate.

For effective employee fraud prevention, call the registrar of the college. They could verify for you if the candidate attended their institution or not, whether they graduated, and the degrees they earned.

Former Employer Check

You can also try contacting an applicant’s previous employers. A great question you can ask them is: “Would you hire this person again?”

The answers will enlighten and guide you in making a decision. After all, if a previous employer won’t hire a candidate back with skills and experience, why should you?

When calling the references provided by a candidate, always remember that trustworthy and reliable people have nothing to hide and will be honest with everything they state and represent. Fraudulent employees, on the other hand, will prey on an employer’s weaknesses and try to get away with dishonest behavior for as long as they can.

Invest in Integrity Testing

If you truly want an effective employee fraud prevention system in your recruitment process, it’s best to invest in an integrity test for hiring. An integrity test will help prevent employee theft and employee fraud and protect your company from dishonest individuals.

A typical integrity assessment measures the following:

  • Trustworthiness
  • Rules Compliance
  • Non-violent attitude
  • Accountability
  • Candidness

However, the scope of integrity testing reaches far beyond ascertaining a candidate’s probability to lie, steal, or commit fraud. Measuring an applicant’s integrity will allow you to form a holistic assessment of the individual and determine other aspects of their character such as trustworthiness, dependability, values, and work ethic.

Integrity assessments also benefit organizations on many levels, not just fraud prevention. These tests offer objective predictions on a candidate’s job performance compared to unstructured interviews and can be valid predictors of absenteeism and counterproductive behavioral tendencies.

For more information and inquiries about preemployment tests, don’t hesitate to contact Aptitude today.

Test for Culture Fit

Another way on how to prevent employee theft and fraud is by hiring culturally fit individuals for your organization. Ensuring that a candidate’s priorities align with your company’s mission and vision will allow you to have a more harmonious workplace. You also do not have to worry about fraudulent activities if your employees are satisfied with the company’s culture.

There are several ways to check if a candidate is culturally fit for your company. Aside from conducting interviews, you can ask candidates to complete personality tests. This method will allow you to learn more about every applicant’s characteristics.

You can also use integrity tests to assess a candidate’s culture fit. This tool allows you to determine an individual’s resistance to managerial direction and measure predispositions towards rules of engagement. The information you gather from the results of this assessment will help you decide if the applicant will thrive within your company culture.

Employee Fraud Prevention Practices to Implement in the Workplace

The PwC data showed that the biggest fraud incidents in the Philippines are carried out by employees who have been working in the organization for almost half of their life. That is why it is also important to implement employee theft and fraud prevention measures within your organization.

Ensure that your existing employees are honest in what they are doing using these strategies.

Implement internal controls

Internal controls are plans you can implement to safeguard your company’s assets and detect or deter theft and fraud. For instance, the segregation of tasks is an integral component. If there are discrepancies in collections, these can easily be revealed. 

You should ensure that there are checks and balances in place when you create separate duties for your employees. Each task that involves expenses must go through a series of approvals to ensure legitimacy. You must also have several team members keep your company’s books, handle payroll, make deposits, and audit bank statements for transparency.

Documentation is another one that can help you detect fraud as it lets you verify if sales receipts or bank deposit preparations were documented.

Once you’ve set up your internal control programs, monitor and revise them consistently. It’s also best to consult with professionals who have experience in this area to help you set up a fraud prevention program or internal control process in place.

Make employees aware there's a fraud prevention system in place

Your organization’s employees should be aware of the fraud prevention policies in place and the consequences associated with them. This type of awareness will affect all employees. Fraud employees who know that management is casting a watchful eye will hopefully be deterred by this. In turn, trustworthy employees who are not tempted to steal or commit fraud will be made aware of possible signs of theft or fraud. These honest employees can be your assets in fraud prevention.

Create a Culture of Trust

Don’t forget that a positive work environment can also prevent employee theft and fraud. This means you should have a clear organizational structure, written procedures and policies, and fair employment practices.

A great employee fraud prevention system can also take shape in an open-door policy as it gives employees open lines of communication with management. Senior management, HR teams, and C-level executives should also lead by example and hold each employee accountable for their actions, regardless of their position within the organization.

By implementing these strategies, you can create a culture of trust in the workplace that everyone will appreciate.

Reassess Existing Employees’ Integrity and Trustworthiness

Ensure that your existing employees remain loyal to your company by assessing their integrity regularly. Contrary to common practices, you can provide integrity tests to your employees and not just applicants.

When you regularly test your team members’ integrity, you can track any changes in their priorities and determine any likelihood of fraudulent activities. You can also use the results of this assessment to assure that your workforce remains honest, trustworthy, and dependable.

Terminate Fraudulent Employees Right Away

Theft can be in the form of stealing money, supplies, inventory, faking accounts, and—one of the most common forms—stealing time. Too often, organizations end up paying employees for time not worked. These are all forms of dishonesty and if it goes unnoticed, your losses will just keep mounting higher and higher.

The best way of how to stop employee theft is to immediately terminate the perpetrators who are caught stealing. Make sure you have undeniable evidence so the employee cannot defend their wrongdoing.

Remember that employee fraud, theft, embezzlement is either black or white. You should not tolerate it within your organization unless you want others to follow in their footsteps.

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Stay on Top of Employee Fraud Prevention During the Recruitment Process and Have a Solid Follow-Through

Employee fraud prevention is the responsibility of everyone in an organization, particularly those in leadership roles. To support the long-term success of your company with a competent and reliable workforce, your recruitment team should have permissible information to gather and use during the employment screening and hiring process.

With a thorough and efficient recruitment process that includes comprehensive applicant screening and integrity testing, you can help prevent employee theft and reduce overall workplace risk. Identifying vulnerabilities and risks early, prior to onboarding an employee, helps protect the organization from risks related to financial security, legal non-compliance, and irreversible damage to corporate brand or reputation.

Lastly, you should implement employee fraud prevention measures for your existing team members. Creating fraud and employee theft avoidance processes for your organization will allow you to ensure the trustworthiness of your existing employees no matter how long they have been working for your company.

I’m In! What Do I Do Next?

Reach out to learn more about our pre-employment testing services today and take advantage of our introductory promo. You’ll get a full overview of the questions as well as a sample report. 

We can provide online or on-site training on how to administer the test and interpret the data given.