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Some of the biggest threats to your company come from within. Because of this, you may need extra support to guarantee a safe environment and to stop potential crime before it causes problems. As with other prevention cases, this is best handled by an investigations professional, for many reasons.

First, let's take a closer look at the inherent problem of internal security threats. While threats from outside criminals, especially hackers, can still pose a threat, the need for vigilance within the business remains high.

What can a fraudster do?
An employee can act alone or with a criminal syndicate: Either way can cause problems for the business. Whether your company handles sensitive personal information for your clients, large amounts of cash, company proprietary information, or is in the position to approve the work of vendors, the potential for a fraudulent worker to do real damage is very high.

"The need for vigilance within your business remains high."

A 2014 CSO (Chief Security Officer) article listed some examples of individuals who managed to hurt their employers, or at least tried to. In some cases, such as the one involving Fidelity National Information Services database administrator William Sullivan, the employee simply stole internal records to commit fraud. In other cases, the act can take time, such as Omega employee Timothy Lloyd, who was described as having implanted a "software time bomb" to sabotage his place of work.

All of this is to say that fraud can come in many forms. A disgruntled worker can do anything from small-scale theft to a vendor kickback scheme. And if there are multiple people working together to commit fraud, the number of moving parts involved will increase, challenging employers to do more research to determine if someone is involved in illegal activity, or even just activity that is counter to corporate ethics and compliance policies. Depending on your industry, you may have to worry about both financial losses and unforeseen consequences like lawsuits, bad publicity, and even government penalties.

Even small businesses can be home to fraud, and with fewer resources on​-hand, they may have a harder time discovering the fraud, investigating the extent of the fraud, or recovering from a damaging case.

What can specialized investigations do?
When you suspect employee or vendor malfeasance, you should work with someone who knows all of the legal specifics of this field. This person should also be able to lead you through the proper procedures that will increase your chances of successfully identifying all of the perpetrators, increase your chance of recovery, help mitigate similar problems in the future, and protect the company from further loss and liability.

With the proper investigative experts on your side, you can expect:

Frizell Group has a lot to offer businesses with possible fraud on their hands. That's why we specialize in such investigations. Contact us to find out how we can help your business.

Category: Investigations March 13, 2023

Companies of all kinds and within all industries, large and small, have to be on guard against theft, fraud and misuse of resources. It can be difficult to detect and prevent internal threats to companies' finances and other valuable assets, with workers successfully defrauding employers in large numbers every year. The impact of an unnoticed pattern of fraud and theft can be devastating, highlighting the value of improving asset protection in 2018 and beyond.

Internal actors have many ways to misuse their access to sensitive accounts and information. The exact nature of the schemes employed by criminals can differ widely, but the end effects are the same – losses for the companies they're stealing from. To deal with these crimes, companies should invest in wide-ranging and varied detection and prevention approaches. Failure to get ahead of a case of fraud could end up costing organizations hundreds of thousands of dollars in a typical company.

Insider crime by the numbers
According to the Association of Certified Fraud Examiners, the median loss from fraud over the past year is $130,000 per incident. In 2017, companies lost more than $7 billion, and 22 percent of fraud incidents cost the victim organizations $1 million or more in a single case. The median time for a scheme to last was 16 months, meaning many organizations suffered thieves in their midst for more than a year at a time. Some are doubtless dealing with internal bad actors right now, and they don't know it yet.

One of the worst scenarios a business can suffer is several thieves working together and colluding with one another. According to the ACFE data, a single fraudster causes median losses of $74,000. When a group of two strikes, losses rise to $150,000. The median damage for a fraud ring of three or more people is $339,000. Furthermore, long-tenured employees tend to steal more than those newly hired. People with five-plus years' tenure took a median of $200,000, while newer employees stole half that amount.

Small companies are just as susceptible to fraud, theft and employee misuse of resources as their larger counterparts. In fact, with their smaller overall budgets, these organizations may be significantly more vulnerable to the ongoing monetary losses. The Journal of Accountancy noted the lower overhead of small businesses leads to a twofold problem: These operations have less money to set aside for anti-fraud controls, but more risk of suffering debilitating losses if a crime takes place.

A businessman stuffs money in his pocket.

Examples of high-level theft cases
Some of the most recent public examples of fraud and corporate theft come from the Internal Revenue Service. Employees who misappropriate company funds often run afoul of tax authorities, leading to the detection of their schemes. The IRS's latest report shows the variety of ways people can defraud their employers and the vast amounts of money that can be lost this way. For instance, an HVAC contractor employee created a corporate entity solely for the purpose of skimming money from legitimate contracts paid to his employer. He stole $350,000 before he was caught.

In another example cited by the IRS, a manager in HBO's talent relations department managed to embezzle over $1 million from the television network. As with the previous example, the fraud involved creating a fraudulent company which supposedly provided makeup services to actors but actually just stored improperly billed money.

Potential protective measures
Just as there are many ways to steal money or valuable assets, companies have numerous methods of protecting themselves from the resulting losses. Whether they employ these approaches may determine their ability to detect theft in their midst.

Avoiding devastating consequences
When business owners hear news about massive losses or study the amounts stolen in the past year, they may wonder if their organizations are next. Unless they have the appropriate frameworks in place to detect and remove internal fraudsters, they may end up suffering a fate like those they've read about. It's much harder to address corporate fraud after the fact, which means there's a significant amount of value in being proactive and thinking ahead.

Potential signs of trouble can be subtle, from an incorrect number coming up in an inventory check to a suspicious financial statement. Being able to tell the difference between innocuous events and threats that demand action is a sign of a company with its fraud prevention efforts under control.

Frizell Group was established in 1995 by David P. Frizell, Jr., CFE, a Certified Fraud Examiner and former federal law enforcement and counterintelligence agent. He and his highly qualified team create the ultimate blend of people and skills to be productive in any corporate investigation.
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