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Employee Fraud: How to Detect and
How to Prevent it

Travel Businesses of all kinds and sizes are increasingly threatened by fraud. One of the most difficult situations to come to terms with is when that fraud is committed by your own employees, often those who you have trusted over many years.

Employee dishonesty can be damaging not only to your bottom line, but also to your reputation. After an event, it is common to feel a huge sense of betrayal and shock.

Employee Fraud

The fraud can range from a receptionist stealing petty cash, to a consultant misappropriating funds or an accounts clerk re-directing money to their own bank account.

In these high pressure times, you may have missed subtle warning signs. Ideally we want to assist by providing you with practical tools that may prevent you becoming a victim, because while you can insure for the financial loss, the time involved and disruption to your business is sometimes impossible to quantify.

In the case of Employee Fraud, prevention is always the best option.

What to keep an eye out for?

  • Employees living beyond their means

  • Financial difficulties

  • Unusually close relationships with customers / vendors

  • Unwillingness to share duties (eg takes very few holidays)

  • “Wheeler-dealer” attitude

  • Opportunity is the key element that can assist your business reduce the risk – who has the opportunity?

Detecting Fraud

  • Be accessible to your employees, customers and suppliers. Develop mechanisms to track correspondence and if you think something might be wrong, check it immediately, and check it yourself.

  • Examine cancelled cheques for alterations or forged signatures

  • Senior non-accounting personnel should retain exclusive authority to approve all payments and insist on inspecting original documents before authorising. If this is not possible, have “two to sign” or “two to authorise”.

  • Know your suppliers and the relationships your staff have with them. When master file data is added, changed or deleted, make sure an email is sent direct to you notifying you of this change

  • Measure progress toward financial goals and investigate significant variances from expectations.

  • Scrutinise corporate credit card charges and employee expense reimbursements.

  • Deposit and reconcile cash receipts on a daily basis

  • Conduct targeted internal audits of the accounting department or on client files on an unannounced basis.

  • Develop procedures to query accounting system to check for voids, duplicate payments, payments in excess of invoice amounts or payments near approval thresholds.
  • Pay attention to changes in supplier payment patterns. Any sudden unexplained changes should be investigated.

Preventing Fraud

  • When hiring, conduct thorough employee background check and do a police check

  • Verify past employment dates and conduct and confirm relevant education details and credentials and always obtain references

  • Review your Policies and Procedures

  • Develop audits, especially for high risk areas, even if only spot audits

  • Require dual signatures for approvals of financial transactions

  • Enforce mandatory vacations

  • Purchase crime insurance including Employee Dishonesty coverage (sometimes referred to as “Fidelity Insurance”).

If you believe that this issue is relevant to your business, please feel free to contact Rebecca Fleming, Affinity Manager at Gow-Gates Insurance Brokers on (02) 8267 9919 or to discuss your circumstances or to obtain a quotation.

Free property report

Gow-Gates Insurance Brokers advises that persons should not act on the material contained in this article as the items are of a general nature only and may be misinterpreted. We therefore recommend that advice be sought before acting in these areas.