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Crime Insurance: Addressing Workplace Fraud


Crime Insurance Addressing Workplace FraudDid you know that the average organization loses five percent of its revenue due to fraud each year? What’s more, according to the Association of Certified Fraud Examiners (ACFE), median fraud loss among U.S. companies is $100,000. Occupational fraud in the workplace comes in the form of asset misappropriation, which is by far the highest participation of fraud at about 85% of all incidents; corruption; and financial statement fraud.

How do organizations typically detect that fraud has taken place? Receiving tips from other parties tops fraud detection at more than twice the rate of any other method, followed by management review, internal audit, by accident, account reconciliation, document examination, external audit, surveillance/monitoring, notification by law enforcement, IT controls and employee confession.

Who’s providing the tips to fraud going on in the workplace? The ACFE cites other employees as providing tips in 49% of the time, followed by customers (21.6%), anonymous tipsters (14.6%), vendors (9.6%), others (6.5%), shareholders/owners (4.3%) and competitors (1.5%).

In order to detect and minimize workplace crime, targeted fraud awareness training for employees and managers is critical for a well-rounded program. Detecting potential fraud involves tuning into certain behavioral red flags that employees may be displaying including: living beyond one’s means, financial difficulties, unusually close association with vendor/customer, control issues/unwillingness to share duties, “wheeler”-dealer attitude, divorce/family problems, irritability/suspiciousness /defensiveness, addiction problems, complaining about inadequate pay, past employment-related problems, refusal to take vacations, excessive pressure from within organization, social isolation, complaining about lack of authority, excess family/peer pressure for success, instability in life circumstances and past legal problems.

To help minimize workplace fraud, make sure that the following measures are in place:

  • As the owner, open bank statements and peruse cancelled checks.
  • Publicize rewards and confidentiality for whistleblowers.
  • Have mandatory vacations.
  • Implement, if possible, job rotations.
  • Conduct surprise audits.
  • Segregate duties to prevent any one person from having too much control over a particular business function.

In addition, ensure that you have a robust Crime & Fidelity insurance solution in place. Crime insurance is an integral part of any risk management program and can help recover losses of your cash and assets in the event of a theft. The key is to make sure your organization has enough coverage, that you understand the evidence needed to support the fraud claim and what triggers the coverage. At Axis Insurance Services, we specialize in providing firms with Crime insurance and would be happy to review your coverage and provide you with our recommendations in improving your insurance program. Just give us a call at (877) 787-5258.

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Blogged on: December 2, 2015 by Mike Smith
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