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Best Practices for Preventing Fraud Within the Workplace

Preventing Fraud

Businesses have enough to worry about with competition from outside sources, so fraud that takes place within a company can be viewed as an unnecessary headache. Not only do businesses have to be on their guard constantly to fend off external threats from their competitors, but they also must be on the lookout for signs that their employees may be trying to bring the company down from within for personal gain. Whether they’re disgruntled, selfish or just plain bored, employees who commit fraud may be able to get away with their crimes for a long time. That’s because they can hide in plain sight. In many cases, employees committing fraud are the ones responsible for gatekeeping the sensitive data and systems they exploit.

There are many ways employees can commit fraud and hurt a company from the inside. One of the most common ways fraud happens is when employees manipulate company records or orders to funnel money or goods to themselves. These employees might alter payroll records to get credit for hours they did not work; they may doctor accounts payable to duplicate payments to vendors; or they may simply take physical assets home with them at the end of the day. A common type of fraud includes intellectual property fraud, in which employees may try to steal sensitive information or pass counterfeit items as legitimate. Another example is corruption, in which employees may try to manipulate relationships with vendors to gain benefits in exchange for preferential treatment.

Although the effects of fraud can be devastating to a business, there are steps businesses can take to protect themselves and prevent prevalent types of fraud that could take place within their companies. For example, businesses can inoculate themselves against fraud by creating an internal culture that concentrates on employee satisfaction and teamwork, which can prevent the feelings of disgruntlement that push many to commit fraud in the first place. Dividing important tasks such as managing payrolls and accounts payable among employees also reduces the chances that an employee will try to get away with something. Above all, employers need to establish clear-cut expectations for employee behavior and ensure that they are clearly communicated. Simply by letting employees know that fraud is not tolerated, employers can send a powerful message.

The accompanying guide contains more details about widespread forms of fraud and some of the steps employers can take to combat them. Your business has enough to worry about with your competition, so don’t let internal threats tear your business apart from the inside.

Common Types of Fraud

Payroll Fraud

  • Employees may doctor their timesheets to take credit for hours they aren’t working.
  • This enables employees to take home more pay than they are entitled to, stealing from the company.
  • Employers should double-check all payroll records monthly to check for discrepancies.

Intellectual Property Fraud

  • Employees may try to pass off counterfeit goods as genuine articles.
  • This can harm a company’s reputation as well as open the door for litigation.
  • Companies should limit access to important intellectual properties and make sure intellectual properties are protected by copyright, patent or trademark.

Vendor Fraud

  • Employees may attempt to manipulate accounts payable or payment systems to funnel money to themselves.
  • This can go unnoticed for a long time, especially if a business has large numbers of transactions involving vendors.
  • This is a situation where having multiple employees share responsibilities can help. It reduces the risk that one employee can get away with fraud.

Asset Misappropriation Fraud

  • Employees engaged in this type of fraud manipulate records to hide fraudulent movements of cash or goods in a way that benefits them.
  • This can cost businesses a lot or a little, depending on how sophisticated the fraud is.
  • Using automated technology to handle shipping records or payroll creates less opportunity for this type of fraud.


  • This generally refers to employees who try to leverage relationships with clients or vendors for personal gain with the promise of favors.
  • This type of fraud creates an unfair balance in the business-vendor relationship and has the potential to hurt a business’s competitiveness.
  • Establishing a clear code of ethics and making sure employees are aware of it helps set expectations and keep employees honest.

Fraud Management Best Practices from Column Case Investigative

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