In the last year, one of the most significant trends I have seen is carriers asking about internal fraud, specifically inquiring as to detection methods to help identify and prevent this unfortunate occurrence. Talking about ways to monitor internal employees is always a sensitive topic; after all, we hired these individuals in the first place to be members of our corporate team! However, studies reveal that if opportunities present themselves to a normally honest individual, there is a proclivity that they will act upon it if the risk is worth the reward and the chances for detection are minimal.
During my career, two personal experiences of internal theft confirm that these offenders were what we would consider normal, non-criminal, and furthermore, had no prior criminal involvement of any type. Both offenders were actually quite similar in their demographic and background; both were fathers of several school aged children, were happily married, had solid positions, and always performed very well in their respective areas. There were no pre-indicators present in either of their backgrounds. In my book, I present ways to help combat internal thefts, such as: checks and balances, codes of conduct, culture of honesty, hiring practices, internal training, wages, hotlines, information sharing, legislation and vacations. These are several methods carriers can utilize to help try and avoid these occurrences.
What would vacations have to do with internal theft? Interestingly, studies reveal that a large number of internal fraud cases are discovered when the offender takes a vacation! When an employee is on vacation, others often have to delve into areas of the employee’s specific accountabilities, which often reveal fraudulent activity. Vacations are a forced system of checks and balances. There are documented cases that demonstrate that internal fraudsters often take fewer vacations than others, as they feel that their fraud has a greater chance of being discovered if they are absent. Oftentimes internal fraud is uncovered by a simple situation that needs verification by the vacationing employee, yet in their absence, discrepancies are noted. I recall one situation when a vendor called to have a check reissued; the assigned claim employee was out on vacation, and thus a colleague had to delve into the file and reissue the check. The colleague discovered that the claim representative and vendor had an unethical arrangement in their vendor relationship. All of this would not have been discovered if the employee was not on vacation. Companies should be wary of employees who carry over a large number of vacation days per year without any reasonable explanation.
Lesson learned—encourage employees to take vacations and be wary of those that don’t!
Stay safe!
Dr. Fraud