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Spotting Risky Team Members

Workplace fraud is a significant financial issue: globally, it adds up to a full 5 percent of annual revenue; for Farm Credit, it’s totaled more than $27 million since 1991, with the average loss of a fraud incident being $1.84 million. With fraud insurance included in the Farm Credit Captive coverages, half of the Farm Credit fraud insurance claims have seen at least a partial recovery of funds stolen, but theft and embezzlement still take a toll.

As much as we don’t want to think about it, the fact remains that some individuals are prepared to take advantage of opportunities to steal or embezzle. Identifying these employees before they have the chance to harm your organization requires paying attention to individual behaviors. 

A 2016 global study from the Association of Certified Fraud Examiners (ACFE) identified specific “red flags” for employers to monitor in order to prevent employee fraud. In more than 91 percent of the cases included in the study, at least one behavioral red flag was identified prior to detection; in 57 percent of cases, two or more red flags were seen. 

“What is even more notable is how consistent the distribution of these red flags has been over time,” says Debbie Dettmer, Managing Director in FCC Services’ Risk Management & Insurance Department. “The top six most common red flags have been the most common red flags in every report since 2008, when the ACFE first began tracking this data.” 

The study found that while men and women were almost equally likely to commit fraud (54 percent of perpetrators were male, 46 percent were female), the factors leading to the fraud differ: women were much more likely to commit fraud based on factors relating to financial need or life circumstances, such as general financial difficulties, addiction issues, or divorce or family problems; men were much more often seen as having improper relationships with vendors or customers, or evidencing a “wheeler-dealer” attitude. 

“Farm Credit’s experience seems to mirror this study quite well,” says Debbie. “The most recent larger losses have involved the close relationship with a customer, the general wheeler-dealer attitude, and especially when senior management has been involved, the individual has been domineering and defensive.”

Another red flag to watch out for isn’t so much about the perpetrator’s behavior, but about their performance or on-the-job experience: in 37 percent of the cases studied, the employee experienced poor performance reviews, demotion, fear of job loss, or cuts in hours, pay or benefits. Other things to look out for are the refusal to take vacation time, social isolation, past employment-related problems, past legal problems, and excessive pressure to perform within the organization.

“Clearly, fraud is a serious problem in business in general and within Farm Credit, but we’re not suggesting that employers stop trusting their employees,” says Larry Lawson, Executive Vice President of Risk Management and Insurance Services with FCC Services. “What we are suggesting is that employers make the effort to truly know their employees and what’s going on in their personal lives, and be ready to step in and assist them if they’re going through a difficult time.” 

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