Employees Who Steal Are Playing the Long Game and the Impact Is More Severe Than You Think

Employee theft isn't a one-off act like once perceived; many employees stealing from their company have been with the institution for years — and they're not acting alone.
By: | February 4, 2019

Embezzlement from a place of employment is not a lone-wolf act, said one 2018 Hiscox study.

It surveyed a “targeted group” of chief financial officers, accountants and controllers who worked in a setting where such crime took place, gaining insight on who, how and why employees steal.

Who’s Stealing 

The study, “An Insider’s View of Employee Theft,” found that 79 percent of cases reviewed involved two or more people working in concert, and typically the number was as many as three. One example they gave was of the chief fiscal officer of a state agency and her son who worked together to steal over $1 million from the organization.

While billing fraud was the most common method, theft of cash, stealing company or employee property, check tampering, payroll schemes and skimming from credit cards are other widely used techniques.

Perhaps more worryingly, the crimes were not committed by new or unseasoned personnel. The study revealed that 70 percent of embezzlement schemes were conducted over a year or more by people who had been employed, on average, for eight years at the organization, most commonly at the manager level or above and typically in the accounting and finance departments.

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Worse still, embezzlement is far from a rare occurrence — 39 percent of respondents said they’d seen more than one case in their careers.

What Embezzlement Is Costing Companies

The study also detailed the degree of losses associated with embezzlement, which are sizable: The average amount of money stolen was $357,650. Only half of companies that suffered a loss recovered funds, and those that did, only saw 39 percent of the total amount returned.

The full cost of this white-collar crime encompasses more than dollar amounts, however. Twenty-nine percent of respondents said that when the scheme was uncovered, the company had laid off the thieving employee and had to pay for increased auditing.

Many (26 percent) lost customers or had difficulty attracting new customers in the wake of the crime. Lost business partners and tarnish to the company’s reputation round out the negative side effects suffered.

Embezzlement is far from a rare occurrence — 39 percent of respondents said they’d seen more than one case in their careers.

“This is a pervasive issue for companies of all sizes, and the goal of our study is to underscore the importance of having a plan in place to protect a business, its employees and its customers from the far-reaching repercussions of embezzlement,” said Doug Karpp, the company’s Crime and Fidelity Product Head.

Other Key Insights

  • Familiarity – The study found that people tend to wait until they’ve worked long enough at a company to see how things work. Once they are familiar with the day-to-day operations, the embezzler can pin-point who may be willing/able to help and where to target the company.
  • Motive – An embezzler’s motive may vary, but often its linked to financial crisis or a need for money. Some justify their actions as a loan they intend to pay back, while others who are unhappy with the institution call the theft something they’re entitled to.
  • Encouragement – If stealing is easy, thieving employees are often encouraged to steal again. Which, in turn, leads to potential groups plotting and stealing together.
  • Exposure – In 65 percent of cases, someone in the company noticed something was amiss after about two years, according to the data. Often, an embezzler is exposed by a co-conspirator leaving the company or they’ve stolen too much on a regular basis.
  • Punishment – Depending on type and severity of punishment, embezzlers will likely start their schemes again with a new employer. However, 45 percent of cases do have charges brought against them.
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Ways to Stop a Thief 

The bottom line: Spotting employees on the take isn’t easy. However, there are some measures businesses can implement to minimize risk:

  1. Assign financial responsibilities like payroll to more than one employee. Fellow employees are usually the first to ferret out embezzlement, and it’s worth training them to look for key signs of and motivations behind malfeasance.
  2. Perform background checks as allowed by law on new employees. Especially the ones who handle money.
  3. Keep an eye on employees who are living a lifestyle that’s out of proportion to their salary. The report notes that sudden changes to spending habits can be a sign as well.
  4. In the event a thief is spotted, the study encourages companies to press charges. It sends a “message to other employees that you take embezzlement seriously, and you’re not giving anyone a free pass by letting them leave quietly.”

Finally, insurance can help protect against the financial losses associated with theft and help make the company whole again. Surprisingly, up to three-quarters of respondents said they don’t have insurance to cover embezzlement. &

Elisa Ludwig is a contract writer based outside Philadelphia. She has written extensively about cybersecurity issues for the Junto blog on the eRiskHub. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]