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Seven Ways To Prevent Employee Fraud


​​​MNP's TAKE: Employee fraud more often than not takes people by surprise. Which means you, as the owner, have to work harder to prevent it from happening. A program to minimize the impact of employee fraud addresses three main issues: prevention, identifying vulnerabilities as early as possible and a consistent, thorough response.

To find out more, contac​​t Greg Draper, Vice President,Valuation, Forensics and Litigation Support at 403.263.3385 or [email protected]


Prevention is a key component in stopping fraud in your company, and it’s up to you, the owner, to implement controls, conduct employee awareness programs, and quickly identify and investigate instances of possible fraud.

Here are seven specific fraud-prevention steps to take:​

Know the Signs.

Remain alert to employee habits and lifestyles that make fraud more likely. These include employees who are: living beyond their means or having financial problems; going through divorce, family, health, psychological, or addiction problems; frequently complaining; resisting input or assistance from others; or having a close association with vendors.

Do Periodic Fraud Assessments.

With a trusted team, conduct regular fraud assessments of your company. Examine weaknesses in your controls and oversight policies. For example, is there a system of checks and balances in place for all of your key positions and departments? Is anyone at your company, such as an IT specialist, the sole employee who performs or understands certain functions, with no oversight? Is anyone working in segregation from the rest of the staff?

Alert Employees to Controls.

Make sure everyone at your company knows that you have controls in place to respond to potential risks, and will take corrective action if fraud at any level, even a seemingly minor infraction, occurs. Have all of this in writing. Discipline employees consistently, whenever rules are broken, no matter their position at the company.

Have Continuous Ethics Trainings.

Although a company has written policies and controls in place, continuous training is important. Ethical behavior has to be a core value of your company’s culture, and that happens when people get a lot of practice thinking about and solving hypothetical ethical problems. Get them involved with the issues by holding trainings that are dynamic and memorable.

Set Up Communication Channels.

Have an open-door policy for communication between top management and employees. Establish anonymous hotlines or other types of reporting mechanisms for employees to report suspected fraud or other abuses within the company. No one wants to work with a dishonest employee.

Perform Background Checks On New Hires.

Past employment problems can be a red flag to watch for. It’s amazing how many employees who were caught embezzling had prior convictions that no one knew about because a background check was never conducted. Verify previous employment of all applicants, check references thoroughly, and ask references if they know others you might contact. Verify education, licenses, and certifications.

Conduct Exit Interviews When Employee Leave.

First, it’s crucial to remind employees who are leaving your company of any noncompete agreements they signed. Second, you can use the exit interview as an information-gathering opportunity. You might be surprised what departing employees have to share with you now that they have nothing to lose.

It’s important to remember that fraud comes in many forms. It can be as minor as writing an IOU in the petty cash drawer without asking, or as serious as stealing proprietary trade secrets. Serious infractions often start when employees are working in a company culture where dishonesty is overlooked or a small amount of cheating is tolerated or goes unnoticed. Remain attentive, and don’t tolerate illegal or unethical behavior from any employee, no matter how insignificant it seems.


This article was written by Richard Weinberger from Business2Community and was legally licensed through the NewsCred publisher network.