Internal Fraud

The perpetrator is on the inside, so they know the processes and where oversight is thin. Schemes include stealing cash, false expense claims, payroll fraud with ghost employees, taking bribes or kickbacks, misusing company assets and falsifying accounts. It is often committed by trusted, long-serving staff, and collusion between two insiders, or between an insider and an outsider, defeats checks designed for one person. Losses build quietly because the offender may also control the records. Typical controls include segregation of duties, approval limits, mandatory leave, rotation, background checks, whistleblowing channels and surprise audits. Tips from colleagues are among the most common ways it is discovered. Where one person can both approve and record a payment, the opportunity is already open.

A payroll officer in a mid-sized company keeps the details of three staff who left and continues to run their salaries into accounts she controls. The extra pay is small each month and goes unnoticed for eighteen months. A new HR system matches payroll records against active staff, flags the three payees, and the company recovers part of the sum after dismissing her and informing the police.