1. Potential Red Flags include:
• Employees who live beyond their means with
excessive lifestyle changes
• Employees who recieve a sudden large amount
of money and make excuses (inheritance,
investments doing well, etc.)
• Employees enduring financial difficulty
• Refusal to take vacations or time off
• Refusal to delegate responsibilities
• Employees who become anxious or irritated
at reasonable questioning or provide answers
that seem odd or make no sense
• Refusal or delay in providing financial records
• Refusal of a promotion for fear of detection
• Borrowing money from co-workers
• Lifestyle problems (addiction, debt, divorce,
illness, spouse losing job)
Although prevention and deterrence are both
key elements in combating fraud, early
detection can mean the difference between
the loss of a few hundred or a few million.
Why Employees MAY NOT
Report Fraud:
Fraud is defined by the Association of Certified
Fraud Examiners as “any intentional act or
omission designed to deceive others, resulting
in the victim suffering a loss and/or the
perpetrator achieving a gain”. Not all
employees will know this exact definition, but
chances are they have a good idea of the
meaning of fraud. They may even know or
suspect that fraud is occurring within their own
organization. So what reasons do employees
give for not reporting fraud?
• I was afraid of retaliation
• I didn’t know who to report the fraud to
• I was afraid other members of management
were involved
• I didn’t want to get involved
• I was afraid nobody would believe me
(this one is very common)
• Because nobody asked
The fear of retaliation and employees not
knowing to whom within the organization
they should report the fraud to, were primary
reasons given for the lack of reporting. This is
why it is important that an organization’s
anti-fraud policy should include a method of
reporting fraud anonymously, (e.g. via phone
or the web) as well as include the proper
channels of communication within the
organization for reporting fraud. It is also
important that in addition to developing an
effective policy addressing these aspects of
fraud and others, management should make
employees AWARE of the policy through
proper training and ongoing communication.
A well written anti-fraud policy defines the
organization’s expectations of their
employees and can come in handy for human
resource purposes. It also sends the
message to employees that management is
committed to preventing, deterring, and
detecting fraud. Remember, the greater the
perception of being caught, the less likely an
employee is to perpetrate fraud.