White Collar Crime is Knocking at Your Door: Are You Prepared?

CPA Scribo provides you with fraud prevention information

If your business has money and employees, then you’re a candidate for white collar crime.

White Collar Crime Happens!

For most organizations, it’s not a matter of if fraud will occur, it’s a question of how much will be stolen. The Association of Certified Fraud Examiners’ biennial survey shows that the average business loses 5% of its revenues to fraud. Imagine adding that amount to your bottom line, because when theft occurs, your net income is reduced by the amount stolen.

As a Certified Fraud Examiner, I have taught thousands of people how to reduce the threat of white collar crime. My teaching–for the most part–has been through the Carl Vinson Institute of Government, a division of the University of Georgia. While I love teaching in a classroom, sharing fraud prevention through CPA-Scribo is loads of fun as well!

No One Steals from My Business

Most business owners, board members, governments, and nonprofits think “fraud may happen in other organizations, but not in our place. Our people are honest.” Well, let me say I’ve seen plenty of “honest” people steal.

In almost every fraud I’ve seen, the business owners and fellow employees are dumbfounded by the occurrence of theft–usually by a trusted employee. People steal because they can. You may be thinking, “What?” Let me repeat, the reason people take is because they can. In fraud prevention parlance, we call this “opportunity.”

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So, am I saying that all people with opportunity steal? No, but individuals who steal have an open door to do so. It’s our job to remove the ability to steal without detection–and to eliminate the temptation.

And why do employees have the opportunity? Because we trust them. Trustworthy people move up the organization chart. And the further up the org chart they advance, the greater the opportunity.

Fraud Cycle

And, how do trusted employees move into positions of authority?

A strange cycle happens in white collar crime:

• We hire a likable, trustworthy person
• The employee serves the organization well, proving his merit
• As he moves to higher positions, he greater ability to steal
• No one monitors the employee because he is (seen as) honest
• The employee realizes he can take without detection
• Small amounts of money are taken to test the water
• Later, the stealing of larger amounts occurs

So, the employee goes from trusted employee to fraudster. The transformation occurs gradually. Often the fraudster rationalizes his theft by saying to himself, “I’m borrowing this money. I will put it back.” Then when the discovery of fraud occurs, everyone is shocked.

Examples of People Who Steal

And what kinds of trusted people steal?

I have seen the following individuals take money:

• Chief executive officer
• Board member
• Pastor
• Church secretary
• Healthcare executive
• A lady who was dying
• Doctor
• College president
• Swim club volunteer
• Seminary Foundation employee
• School principal

I could go on, but you get my point. People who we think would never steal, do.

People who we think would never steal, do.
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So, how can we prevent–or at least lessen–the threat of fraud? Transparency is a key.

Transparency Lessens Fraud

If transparency is important, why don’t businesses have it?

Small businesses often lack the ability to segregate accounting duties, and this lack of segregation creates opportunities for theft. Why? One employee controls several critical accounting processes, resulting in the ability to steal without being seen.

To lessen the possibility of fraud, we must create transparency in accounting processes. Employees are less likely to take when their actions are visible to others. That’s why segregation of duties is necessary–more eyes are on accounting transactions, making it more difficult for theft to occur without someone noticing. Even if an organization has few employees, it’s possible to create transparency. Many of the blog posts in CPA Scribo are about creating this transparency.

How CPA Scribo Helps

CPA Scribo is designed to provide you with fraud prevention information.

I can’t visit everyone that needs fraud prevention assistance, but I can provide (free) information about how theft occurs and how you can lead the way–in your organization–in preventing fraud.

Here are some of my fraud prevention posts:

• 25 Ways Fraud Happens
• City Manager Pockets Cash from the Sale of Excess Property
• How a Tax Commissioner Walks Away with $800,000
• How a College Aid Official Stole $4.1 Million
• Nonprofit Embezzlers Sell Donated Goods for Millions
• Do (Some) Librarians Actually Steal?
• Nonprofit Fraud: Bid-Rigging, Kickbacks and Faulty Payments
• How $16 Million was Stolen from a Bakery
• Is Your Cash Receipts Supervisor on the Take?
• Would Andy Griffith Steal?
• Why Stealing Unaccrued Receivable Checks is Easy
• Circumventing Approval Requirements by Splitting Payments
• Why Some Ranches Have a Bad Smell: The Rita Crundwell Story
• How Credit Cards Expose Organizations to Theft
• I Get By with a Little Help from my Friends: Payroll Fraud
• How Honest People Steal
• Why a Kind Person Steals While Dying
• How Bribes Assault Your Earnings
• How Fraudsters Steal with Inflated Invoices
• How to Steal by Double Paying a Vendor
• How Accounting Tricks Guarantee Increased Earnings
• A Fraudster’s Refuge: The Appalachian Trail
• How Can a Fraudster Write Checks to Himself?
• Stealing and Converting Company Checks
• Trains, Planes, and Automobiles: The Theft of Capital Assets
• How Employees Steal Using a Check-for-Cash Scheme
• Backdoor Payroll Theft of Withholdings
• Are Ghosts Lurking in Your Payroll?
• How to Prevent Wire Fraud
• Skimming Cash Payments
• Fictitious Vendor Fraud
• Key Fraud Statistics from The Association of Certified Fraud Examiners
• How to Steal Money with Altered Check Payees
• How to Use the Camera Effect to Kill Fraud
• How to Educate Children in the Art of Theft
• How to Prevent the Theft of Fixed Assets
• Bribery – Can You Stop It?
• How to Prevent Payroll Fraud
• Red Flags of Governmental Fraud
• Little Old Librarians (Do Sometimes) Steal
• Three Tips for Fraud Prevention
• 10 Powerful Steps to Reduce Theft
• How to Lessen Segregation of Duties Problems in Two Easy Steps
• The New COSO Framework
• Five Disbursement Fraud Audit Tests
• Fraud Prevention for (Very) Small Governments
• Steal Like a Boss
• Corporate Account Takeover
• Fake Bank Confirmation Responses
• Local Government Internal Controls – A List
• In Case of Fraud, Pull Here
• Three Minutes to Better Client Interviews
• Three Receipt-Fraud Tests
• Fraud Stings Auditor
• Theft of Cash From Local Governments (Cities and Counties)

Finally, I hope you’ll join us here at CPA Scribo for more information about fraud prevention, accounting, and auditing. See the subscription box below.

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