Individuals commit business fraud for numerous reasons. Perhaps they’re facing dire financial circumstances or trying to fund a lifestyle that exceeds their income. Maybe they want to fund something more practical such as college tuition, eldercare, childcare or a side business. Regardless of the motivation, the reasons why someone commits occupational fraud boil down to three things: pressure, rationalization and opportunity.
When someone perceives intense financial need they may steal supplies, fudge timesheets, embezzle funds, take kickbacks or illegal gratuities, participate in payroll or billing schemes or any number of other internal acts of fraud.
They’ll rationalize their behavior by thinking your company owes them something or makes so much money no one will notice or even carries insurance to cover such losses.
Once someone rationalizes their illegal behavior, they’ll take advantage of opportunities to commit fraud. Lax internal controls, poor corporate policies, insufficient management review and overrides of internal controls create the perfect opportunity for employees to steal.
You can curb losses by implementing strong anti-fraud controls: enforcing a code of conduct, establishing an internal audit department, commissioning external audits of financial reports, implementing a fraud hotline.
In the event fraudsters still find a way to steal from you, hire an external fraud auditor to conduct an independent investigation, seek restitution and possibly obtain a conviction.
