6 signs that could indicate a fraud inside the company

26 January 2021

We recently talked about protecting businesses from the pandemic fraud. Although our attention may be distracted due to the confusion caused by the COVID-19 pandemic, corporate investigators warn companies that the danger of occupational fraud is constant, and it should not be overlooked.

The main weapon against vulnerabilities is planning and strategic thinking. The more prepared a business is to deal with an attempted fraud, the easier it will be to prevent or detect it. The cornerstone of any preventive strategy is the organizational culture. In corporate investigation projects, we have often noticed the lack of a firm anti-fraud position present in communication to employees and the outside world.

The starting point in the development of a zero tolerance culture against occupational fraud is the understanding of the fraudulent phenomenon. For this, it is necessary that the decision makers (business owner, top management, IT security) learn to recognize the signs of fraud. In today’s article, we set out to describe six of these signs.

  1. Suspicious financial indicators

A company’s financial indicators fluctuate constantly. However, there are some predictable parameters, that so-called business as usual within the company. When the dynamics of these parameters change, business intelligence specialists warn it could be a fraud that can take various forms: established budgets are constantly exceeded, inconsistencies in billing are found (ie, payments “on paper” do not correspond to reality), unusual payments are made, identical payments have been made simultaneously to different suppliers, the invoices of some new suppliers look unprofessional etc.

On the other hand, business investigators point out that if something seems too good to be true, it probably isn’t. In other words, not only financial anomalies can be an alarm signal, but also results that extremely good. If sales predictions are dramatically exceeded, projected budgets are not spent, or if revenues far exceed the expectations, the company may have fallen victim to fraud.

Last but not least, if the business has several bank accounts, the transactions from and towards them, but also the intra-banking ones, must be verified carefully, in order to follow the itinerary of the funds between the different accounts.

  1. Intensification of spam emails

If your business has an internal firewall, which usually blocks spam messages effectively, but it’s been a while since it started allowing more and more such emails to enter your Inbox, it’s possible to have a compromised server within the company. It could affect the integrity of other computer systems and it must be identified as a matter of emergency. Studies show that 83% of corporate investigators have seen a significant increase in cyber fraud since the beginning of the pandemic.

  1. Employees oppose preventive measures

If the management tries to introduce anti-fraud measures within the company, and certain employees oppose, this could be a sign that they have something to hide. Of course, man’s natural instinct to resist change and new must be taken into account. In addition, those measures may affect, to some extent, the degrees of employees’ freedom. Therefore, not every opposition should be treated with suspicion. Reactions must be analyzed on a case-by-case basis and vigilance must be maintained for any persistent or exaggerated opposition.

  1. Sudden development of very close personal relationships

The work environment gives birth to friendships, even romantic relationships, and that is natural. However, there are situations in which these relationships seem to arise “overnight”. In other words, instant friendships are formed between co-workers or between company employees and employees of a customer or supplier. This could be a sign that a fraudulent cell has been set up, that it is committing an illegal act or that it has already committed that act. Such instant friendships arouse suspicion during a corporate investigation and are usually closely monitored by investigators.

  1. Unusual circumstances

Often, an employee will need to stay overtime at the office or even work late into the night. Other times, an employee will need a day off (or even a few days off) to solve a personal problem. These are natural situations in the modern business environment. However, there are also situations in which these circumstances may arouse the suspicion of a business investigator. For example, an employee who constantly needs overtime, for a long period of time, or who insists on staying last at the office after all his colleagues have left home, raises suspicions. It is all the more suspicious if the employee never complains about these overtime hours, does not ask to be relieved of certain responsibilities and does not ask to be paid for the overtime.

Equally, an employee who insists on taking on certain projects or responsibilities without any obvious benefit may raise suspicions. Also, an employee who insistently asks to work with a certain supplier or a certain customer exhibits atypical behavior. Of course, there are situations in which such events are acceptable and are not a cause for concern. However, it is good to monitor such behaviors, especially if they coincide with other signals in this list.

  1. Sudden change of lifestyle

What the employee does with his own money is not in the company’s interest, of course. However, there are situations when an employee’s personal life raises suspicions about his possible involvement in an occupational fraud. A sudden change in lifestyle may indicate a possible illicit supplement to your personal budget. Examples may include the purchase of a luxury car, an exorbitant house or other material goods whose value seems to far exceed the payment level of that employee. This is usually a major alarm signal in the case of a corporate investigation that something is wrong.

These are six characteristics that can raise suspicions about the moral integrity of an employee and that could lead to the disclosure of a case of occupational fraud. Given the vague nature of these signs, they must be treated with the utmost care and discretion. Under no circumstances should unfounded allegations be made, especially in the absence of solid evidence. For this reason, it is preferable that the actual investigation be left in the care of a professional corporate investigation agency. Business intelligence specialists are experienced in detecting and dismantling fraudulent cells and in investigating such cases, in order to obtain certain evidence that can help the business to recover its damage and punish the perpetrators.

The SPIA Romania team offers a wide range of business investigation services, using a large  experience in solving occupational fraud cases, for various industries and business verticals. If you need an investigations agency that is specialized in the Romanian business environment, we recommend you visit our page corporate investigations.