Employee Fraud – What Is It and What Does It Look Like in Practice?

With International Fraud Awareness Week taking place in November every year, what better time to take a closer look at employee fraud – what is it and what does it look like in practice?

Unlike consumer scams and identity fraud, employee fraud often flies under the radar as organisations tend to manage it internally and often without publicising the details. Yet employee fraud can cost organisations significant damage and financial loss – not only from the value of the goods or money taken, but also from the cost and time required to re-hire.

What is employee or internal fraud?

Employee fraud, also known as internal fraud, is fraud or theft that is perpetrated by an employee on the organisation that they work for. It typically takes the form of stolen money or goods but may also be other benefits.

A survey by the Association of Certified Fraud Examiners found that a whopping 80% of business leaders have encountered fraud by an employee during their career. And the prevalence of employee fraud is only expected to grow due to the increase in remote working, creating fewer opportunities for managers and colleagues to spot changes in behaviour or demeanour.

What are some types of employees or internal fraud?

The most common type of employee fraud is credit card and expense fraud. This type of fraud is where employees use company credit cards or company funds to purchase goods and services that are unrelated to the business yet claimed as expenses.

Employees may also engage in false invoicing and accounting fraud whilst in a financial role at an organisation. This encompasses situations where the employee siphons funds to themselves and covers their tracks in the books.

Accounting fraud can often go unnoticed for years and amount to a significant quantity stolen. In fact, one Australian electronics retailer was shut down after it was found that $20 million had been stolen by one of their senior accountants over the span of two years.

Another type of employee fraud is when employees steal physical goods from the organisation they work for. This is especially pertinent for organisations that sell high-value goods such as electronics or designer goods.

Take this example of two freight handling employees who used their access to a restricted area at Brisbane Airport to steal multiple iPhones, iPads, Samsung mobile phones and other phone accessories from freight deliveries over a nine-month period.

A relatively new form of internal fraud is data theft. This is problematic in cases of corporate espionage as it sees the leaking of intellectual property to a competitor or may have even more serious ramifications when it results in the leaking of customer data to cybercriminals who then use it to perpetrate identity fraud schemes.

Recent high-profile cyberattack cases like that of Optus and Medibank have demonstrated how significant the losses can be when customer data is leaked. Losses are felt by customers as they often need to replace their identity documents and become vulnerable to identity fraud, whilst the organisation suffers reputational damage and a high chance of customers moving to competitors that they feel can better protect their sensitive data.

How can National Crime Check help mitigate employee fraud?

National Crime Check is a leading provider of background checks in Australia and New Zealand. We offer market-leading technology to conduct thorough background checks on candidates prior to making an offer of employment and on an ongoing basis.

After decades in the industry, National Crime Check has integrations with the most authoritative Australian and New Zealand government data sources to ensure screening results are accurate and timely. Contact us on sales@nationalcrimecheck.com.au to discuss your background screening needs and protect your organisation from potential employee fraud.