Internal Theft & Fraud: Impossible to Measure; But Enormous

Just how great is the problem of internal theft?

Unfortunately, no one accurately knows the answer to this question. However, I know that this crime is much more common and widespread than reported by those federal agencies gathering and publicizing such data. The reasons for these disparities are not complicated;  inaccuracies arise when a business for whatever reason, fails to report this crime to law enforcement.  Inaccuracies also occur when a law enforcement agency fails to forward crime reports to the national agency responsible for collecting such data, and we certainly cannot disregard the fact that a huge number of theft acts go undetected.

As matter of fact, the U.S. Department of Commerce estimates that 75 percent of all employee thefts go unnoticed. Regrettably, I cannot argue against these figures as Jack L. Hayes International’s annual retail theft surveys have reported some startling statistics over a ten-year period. For example, on a per-company basis, the number of employees actually caught stealing from their employers ranged from a low of one (1) out of every 22.4 employees (based upon a database of 1.9 million employees) reported in 2001 to a high of one (1) out of every 30 (database of 1.8 million employees) reported in 2003. Our 2008 annual survey reported that one (1) out of every 28.2 employees was caught stealing from their employer (database of 2.3 million employees).

Six Costly Mistakes
While it is difficult, if not impossible to identify the true reasons why a trusted employee commits an act of dishonesty, I believe that all employees’ behavior is to some degree influenced by their workplace surroundings. Even though this perception is unqualified, my experiences demonstrate that the majority of times when internal theft is identified, almost invariably one or more of the following six failure factors will be found:

  • Failure of management to perform a background check on critical positions.
  • Failure of management to impose a very basic, but necessary internal control.
  • Failure of management to adequately monitor those internal controls already in place.
  • Failure of management to have a reasonable understanding of where and how internal theft risks occur, and of the role that each should play to help minimize those risks.
  • Failure of management to investigate the validity of potential warning signals or red flags.
  • Failure of management to recognize that any high risk job function delegated to even the most trusted employee without adequate internal controls and proper oversight can quickly prove to be a formula for financial disaster.

Failure factors such as those mentioned above are commonplace in the business world today. These mistakes allow countless numbers of internal theft situations to go unnoticed for years and end up costing a vast number of operations huge sums of money before their detection.

Be assured that whenever an incident of internal fraud occurs, there is a high probability that some manager or supervisor failed to prevent it. $

This entry was posted in Articles. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>