When you hear the words ‘business scams’ what comes to mind? Security breaches? Switching barcodes? Writing bogus checks? While these may be some of the crimes customers or hackers use to steal from businesses, they don’t reflect the ‘business scams’ taking place ‘within’ organizations.
Every year millions, potentially trillions of dollars are taken fraudulently from unsuspecting companies around the world by their own employees and/or vendors. And while many of these crimes are perpetrated on large companies, small organizations are disproportionately victimized by these various forms of business scams (also known as occupational fraud, internal theft and employee fraud). According to the 2010 Report to the Nations, by the Association of Certified Fraud Examiners there are three primary types of occupational fraud:
1. Asset Misappropriations
2. Corruption
3. Financial Statement Fraud
Asset misappropriations schemes account for almost 90% of employee fraud. Employees –from owners to groundskeepers can be very creative when it comes to scamming their company. And the cleaver ways they find to deceive covers three main areas; cash, inventory and fraudulent disbursements. The Association of Certified Fraud Examiners list approximately nine ‘sub-categories’ to these three main schemes:
· Skimming
· Cash Larceny
· Billing
· Expense Reimbursements
· Check Tampering
· Payroll
· Register Disbursements
· Cash on Hand Misappropriations
· Non-Cash Misappropriations
As if the above list was not extensive enough, each ‘sub-category’ has sub-categories. For example:
· Billing includes: External and internal accounts payable fraud, shell company, non-accomplice, and personal purchase.
· Payroll fraud includes: Ghost employees, commission fraud, workers’ compensation fraud, and falsified wages.
· Expense reimbursements includes: Mischaracterized expenses, overstated expenses, fictitious expenses, and multiple reimbursements.
· Check tampering includes: Forged checks, forged endorsements, altered payee, concealed checks, and authorized maker.
· Register disbursements includes: False voids, false refunds.
Invoice Fraud
Many companies are ‘tricked’ into paying billed goods and services they have never received. These scams are successful in part due to lax accounting practices and anti-fraud controls. Some people steal because of hard economic times, others steal for their own personal gain. Regardless of the motive, it’s clearly a problem. The U.S. Chamber of Commerce has long said that 75 percent of employees steal from their employers at least once.