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Becky Bokrand can't discuss a recent case she turned over to the Federal Bureau of Investigations, but she's seen her share of embezzlers.
The certified public accountant is a fraud examiner and certified in financial forensics with the Fort Myers accounting firm of Markham Norton Mosteller Wright. “There are always red flags,” she says.
One of the biggest flags is an employee who has custody or control of money at your company who is living beyond their means. For example, perhaps they're driving a Porsche or wearing expensive jewelry.
Employees in a position to handle money who don't take vacations are another red flag. That's because they're unwilling to share duties because they don't want to be discovered. “The fraudster usually has been a long-term employee,” Bokrand says.
It doesn't have to be big theft. Sometimes Bokrand says “little leaks” add up over time. For example, the front desk clerk of a medical practice may have been stealing small $10 co-pays that patients pay over a long period.
What drives some to embezzle from their employers may provide clues, so background checks before hiring someone are useful. “To me it all boils down to a human resources situation,” says firm partner Gail Markham.
For example, financial hardship as a result of personal bankruptcy, illness or divorce might encourage theft. Vices and addictions are red flags, too.
Watch for unusually close relationships with vendors. Bokrand and Markham say they've seen cases when a vendor was a relative or close friend who regularly overbilled the company and split the money with the employee.
Also, watch for people who isolate. Employees who don't participate in company events are red flags. “Nobody knows what you're doing,” Bokrand says. “They hold it close to the vest.”
The biggest deterrent is regular verification. “That's why internal controls are so essential to minimizing fraud,” Markham says. “Is the boss paying attention?”
—Jean Gruss
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