Occupational fraud is committed disproportionately by long-tenured, trusted employees in businesses too small to have separated duties.
Billing schemes. Fictitious vendors, or a real vendor’s bank details altered. Controls: an approved vendor list with an approval process, callback verification for banking changes, and periodic review of the vendor master for duplicates and for addresses matching employees.
Payroll schemes. Ghost employees and inflated hours. Controls: reconcile the payroll register to the employee list, and review manual adjustments.
Expense reimbursement. Duplicate and personal claims. Controls: receipt requirements, review by someone other than the claimant’s friend, and analytics on round numbers and repeated amounts.
Cheque tampering and cash skimming. Controls: positive pay with the bank, restrictive endorsement, separation of receipt from recording, and daily deposit.
Detection. Most fraud is detected by tips, which is why a reporting channel matters even in a business of twenty people.
Warning signs. An employee who will not take vacation, refuses to share duties, lives beyond apparent means, or has unusually close vendor relationships.
Response. Preserve records before confronting anyone, involve counsel, and consider insurance notice, which usually has a short deadline.