Employee Fraud: Loyalty or Cover Up?

by Amy Pennock CFE


Every company seems to have one of these employees. They show up early every day, appear to be working hard, don’t take breaks or lunch and leave after everyone is already gone. Work isn’t getting done, no problem, they will work on the weekends.  They don’t call in sick and don’t take vacations. They take care of everything, and don’t hesitate to take on other tasks or functions. This might be any business owners dream employee, but beware.

These are red flags you need to tune into and ways to make certain there is no cover up going on in your office:

  • Employees will refuse to take breaks, sick time or vacation time in order to make sure their deceit is not discovered.

Prevention Tip: Make it mandatory for employees to take vacation once or twice a year for at least a couple of consecutive business days.  Cross training other employees to fill in during these times will reduce the potential for fraud to occur, or at least you may catch it quicker.

  • Control over the entire workflow process is a huge risk in any business.

Prevention Tip: Employees may seem that they are stepping up and taking care of business, however they could be taking your business.  At a minimum, establish processes that segregate duties in account payable, accounts receivable and payroll, and make sure your employee manual discusses these processes and the expected actions of these processes are not followed.

  • Bloggers may be disclosing too much information and giving away your goods.

Prevention Tip: Your company blogger may be inexperienced in this area and could intentionally (or not), give away your secrets. (Remember that employee that will take on a new task?!)  Set up guidelines for what your company finds acceptable information to be disclosed and don’t be afraid to be specific.  Set up a process for your blogger to have their posts proofed prior to making it live to the public, and monitor them.

  • Social media junkies are all around us.

Prevention tip: Your model employee may be bragging about that great new project they are working on, the new high profile client they just signed up or maybe talking about what a horrible workplace they come to every day.  While we cannot control what people post on their personal social media sites, we can establish confidentiality policies to bring accountability to employees for releasing confidential information.  There are also many ways you can monitor your company information that is posted on the internet, for example Google alerts.  These alerts will search the web and notify you when a specific key word, such as your company name, appears.  While this isn’t going to catch or prevent an employee from releasing information about you, you may find it quicker and can address your ‘model’ employee.

There are no foolproof methods to make sure your model employee really is displaying model behavior and not covering up deceit or fraud.  However, the last thing you should do is to disengage from your business. Don’t just sit back and let one person run the show, if that one person isn’t you.  Watch for changes in your employees’ behaviors, life styles, spending habits and health habits.  Are they driving a better car than you?   Are they trying to keep up with the Jones’s on a secretary salary?

This is not to suggest that every high functioning employee is committing fraud, however, these are red flags you should watch for and investigate.  With a few simple processes, you can reduce your fraud risk and be assured they are truly a model employee.


Amy Pennock, CFE, is CEO/President of Pennock Consulting Group. Amy’s passion is fraud prevention awareness for businesses and nonprofit organizations.