Crime: Coming To a Business Near You

From the Nov. 2008 Issue

For the owner of a local engineering company, the mystery of the shrinking bank account was solved when one too many clients insisted that they had paid the owner’s bill even though he’d never seen the checks deposited.
At a communications company that had recently relocated to the city, the slap in the face came when they discovered their office manager, whom they moved with them, had been writing a lot of checks to herself for more than a year.

And the technology services company got its first taste of employee crime when the VP was going through the last month’s bank statement and found checks that had actually been altered.

It’s one of the ultimate acts of betrayal by an employee, but the number of companies victimized by someone they had trusted is clearly on the rise. The industry calls it occupational fraud. Call it what you want, but last year the crime wave cost U.S. companies more than $990 billion (or 7 percent of revenue), according to the 2008 Report to the Nation on Occupational Fraud & Abuse published by the Association of Certified Fraud Examiners.

The average loss for all businesses was $175,000, but organizations with fewer than 100 employees fared the worst with a median loss of $200,000. Some 40 percent of the victim companies were privately owned, and the crime (stealing) was carried out (on average) for nearly two years before it was discovered. Check tampering and fraudulent billing was most common, and one-third of the time that criminal was in the company’s accounting department. Most shocking? Only 7 percent of the perpetrators had prior convictions.

These are sobering statistics, particularly for a small company where occupational fraud has put many out of business. Before that happens to you or your clients, consider taking a bite out of the crime by taking advantage of the tools of technology to minimize risks.