South Africa is a crime ridden country and we might only pay attention to specific crimes such as hijackings or robberies, but there are other crimes that occur that are not spoken about. There are some other crimes that occur in businesses that are not addressed publicly out of fear of damaging the business’ reputation.
Economic crimes can include many offenses such as tax evasion, money laundering, embezzlement, and bribery.
Here are some six most common crimes that can occur in the company and can ruin a company financially.
Embezzlement is a common crime that occurs in businesses and business owners need to be vigilant. It refers to the misappropriation of funds that are placed in someone’s care, but belong to the employer. Embezzlement is a type of fraud as the person who wrongfully uses the funds will go to extreme lengths to conceal the truth. An example of this is a bookkeeper using the employer’s money for personal expenses.
In some instances you can spot an embezzler as they are someone who breaks the rules and might overuse sick days or get speeding tickets, they live a lifestyle that they cannot afford or they might be someone who believes that they were treated unfairly and them embezzling funds settles the score.
- Asset Misappropriation
Asset misappropriation is a serious crime that refers to employees using company or client assets for personal gain. This is also the most common fraud that occurs in businesses and the two main categories of asset misappropriation are cash and non cash.
In businesses, the people who are able to commit this kind of fraud include those people who have easier access to financial data and company funds such as accountants, lawyers and financial advisors. It is said that the longer an employee has been working for a company and the higher their education, the more money they are likely to take from the company.
There are different kinds of forms that kickbacks can occur between two parties. Procurement contracts are usually where kickback schemes are likely to occur. This happens when the employee, especially in government is responsible for handling contracts for certain projects such as infrastructure. The employee might choose to receive a kickback and then choose that contractor over others in most instances the person who was better suited to handle the project does not win the bid.
There are some warning signs that indicate kickback such as lack of competitiveness in bidding processes, higher-than-average prices for goods or services, the winning vendor having frequent legal or regulatory problems or management pressuring employees to choose a particular vendor.
Other signs include having vendors in an industry that is known for having kickbacks, employees choosing vendors that provided the business with bad service or product quality, and choosing a vendor who constantly misses delivery deadlines.
Skimming is one of the most difficult kinds of fraud to detect as it is an off-book from that has no paper trail. For example, an employee who works behind the counters decided not to put the money from a cash sale into their pockets instead of going into the cash register.
It refers to money from cash sales not being recorded in the business’ accounting books as the cash is diverted from the business to the employee. It can be difficult to prove and prevent as there is no proof of a sale taking place due to the lack of invoices or register tape.
There are mainly three categories of skimming which are false discounts, unrecorded sales, and short term skimming. False discounts refer to when employees misuse their discounts as a way to make money from the business. A customer can make a full price purchase for merchandise and the employee uses their employee discount to collect the total amount. The invoice will indicate that the merchandise was sold as well as the cash received plus the employee discount, however it does not show who really purchased the merchandise.
Unrecorded sales refer to when employees take money from a purchase and the customer receives the merchandise as they do not receive a receipt or an invoice for the purchase that they make. The inventory report won’t indicate that stock is missing however you will have declining inventory levels.
Short-term skimming refers to when employees take money from cash sales, but with the intention of returning the money at a later stage. The employee might replace the money after a couple of days or weeks to hide the theft and they might choose to ring up a “No sale” transaction to hide wha is happening. Any easy way to detect short-term skimming is by looking at your daily cash reports, look out for days with unusual shortages and overages.
- Double-check Fraud
Double check fraud refers to writing out two checks for single expense, This usually occurs when your accountant or bookkeeper make entries for your expenses into your system and uses codes to identify them. They might write a check when making a payment to a vendor and then they make a second check to themselves using the same code, the bills they make out to the sled are usually smaller which also makes it difficult for business owners to detect the crime.
One out of three businesses will become victims of theft of fraud. The greatest disadvantage that small businesses might have is not having a second accountant who might be able to uncover the fraud through matching the outgoing payments with the copies of the bills. Business owners should consider randomly looking at their books at least annually.
Cybercrime is a growing problem in the workplace and it’s usually committed by their employees contractors and vendors. This is why it’s important to do background checks on people and businesses that you choose to hire or work with. Employees have access to the company’s computer which contain a large internal databases which they can use to cause serious problems to the business.
Some of the ways this can happen is by stealing intellectual property which can be quite expensive for the business as a lot of labor goes into inventing new products and compiling valuable data. Another way cybercrime can occur is through sabotage where an employee can set viruses loose on the computer’s software which can damage the company’s database or alter information.