How to Catch a Thief

Every business owner has trouble accepting that someone they know and trust might be ripping them off. But it happens all the time. Our fraud experts offer some useful tips on how to catch a thief and hopefully put an end to those sneaky inside jobs threatening your bottom line.

Screen effectively:
Ask applicants for written permission to do a thorough background check, including credit and criminal records. That might give serial crooks pause for thought. Contact at least three recent employers. Call references at work through the switchboard, never at the number listed on a resumé. Always ask if they would employ your applicant again. Listen for any hesitation. Check educational qualifications; degrees and diplomas are frequently “achieved” online. A U.S. study recently found that 16 per cent of job applicants pad their resumés. Boost scrutiny:
Keep better tabs on your cash flow and confidential data by introducing new security checks and balances. Some suggestions: if you are a small business, make sure your bank statements are sent to your home; have an accountant or supervisor periodically review your bookkeeper’s work or divide bookkeeping tasks among several employees; install an inventory-tracking system; perform frequent and unscheduled inventory audits; and use expense-management software to track expense-account trends and spot less obvious discrepancies. Limit opportunity:
Locate employee lockers and change rooms away from stock rooms and ware­houses. Install a security pass card system near sensitive areas. Monitor cash registers, stock rooms, warehouses and employee exits with surveillance cameras. Inform your suppliers that your employees are not permitted to accept or solicit any type of cash and ask them to contact you should that happen. Watch for signs:
Know your people. Ensure that super­visors recognize red flags, including a sudden rise in an employee’s living standards, reluctance to take ­vacation or any erratic ­behaviour hinting at substance abuse or addiction. Keep an eye out for unex­plained inventory shortages, a flood of cash-register ­discrepancies or an ­increase in customer complaints about product or service inconsistencies. Trust your instincts:
If you have a feeling something is wrong, it probably is. Bear in mind that theft is more often committed by long-term employees than new hires. Stay secure: Protect personal information and sensitive corporate data by limiting access to secure areas and computer systems to employees and contractors on a needs basis. As a first step, encrypt all computerized records, including those on networks, laptops and remote-access devices such as BlackBerrys and increase security with other technological tools such as passwords and firewalls. Keep it simple:
Don’t buy gadgetry or software with all the latest bells and whistles. It only increases your vulnerability. Routinely remove outdated or non-essential data from your systems. Promote whistle-blowing:
Most reports of pilfering come from suspicious co-workers. Encourage people to come forward by creating a confidential in-house reporting mechanism and religiously following up on every tip. This does not mean operating your business like a police state. As with any company policy, appropriate training will ensure employees support your fraud-prevention strategies. Keep your cool:
Without ­sufficient proof of intent, you could face an unfair-dismissal action if you precipitously sack someone. When terminating an ­employee, ­especially a ­trusted finance or IT professional, conduct the exit ­interview without warning, obtain their access key/card and disable their system accounts before escorting them from the building. Monitor your systems in case they created “back doors” providing an outside access route or left potentially damaging “time bombs” to delete valuable data. Arm yourself:
In Canada theft of more than $5,000 is considered a criminal offence. To support a criminal conviction, you must prove that your employee was guilty of theft beyond a reasonable doubt and that your review was unbiased and fair. Before contacting the police, prepare a report outlining the incident, your investigation process and your detailed findings. Never investigate a theft on your own; you may destroy key evidence or ruin your chances of compensation. Chart your own course:
In a criminal prosecution, you lose control of the case and may or may not win restitution. Most employers will opt first for the civil route, then, armed with a judgment from the court, they might go on to pursue a criminal prosecution. Model zero tolerance:
If you don’t already have one, draft an employee code of conduct. Promote it as part of a culture based on honesty and ethics and include fraud-awareness training. Ensure that everyone knows you will deal with any incident quickly, fairly and consistently and that, when necessary, you will involve the police. Be proactive:
Follow any incident of employee theft and review and adjust your internal fraud controls, especially in the areas of finance, accounting, IT and administration. Hire a reputable, experienced consultant to review your organization, pinpoint your vulnerabilities and help you draft comprehensive fraud-prevention controls. A good source of specialists such as lawyers, private investigators and forensic accountants is the Vancouver chapter of the Association of Certified Fraud Examiners at ­cfevancouver.com. Related stories: Hands in your pockets