What are the 6 signs of embezzlement to look out for?

signs of embezzlement

Last modified on December 8th, 2023

In late 2022 in Atlanta, Georgia, a restaurant manager was found to have embezzled more than $300,000 from his employer. The employee was using the company card to fund his lifestyle, which broke the law. This is one of many embezzlement examples, which costs businesses an estimated $400 billion per year. Read the article to find out about the six signs of embezzlement so you can detect it easily.

Trustpair blocks the financial effect of this fraud by continuously auditing banking data and payments before they’re made. Any suspicious activity – from employees or vendors – is flagged and blocked. Request a demo to learn more!

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#1 Vendors saying they weren’t paid

A vendor reaching out to say that they weren’t paid is one of the warning signs of embezzlement, characterized as financial fraud. For example, an employee of yours could be stealing payments from vendors, and committing vendor fraud. They could be redirecting the bank transfer to themselves and still logging the payment to the vendor.

A variation of this includes that the vendor was paid less than what they were expecting. An employee could have pocketed a portion of the money in the fraudulent transaction.
In an example of this business fraud, a North Andover woman was found to have embezzled more than $157,000 in checks. Over a two year spell from 2017 – 2019, she diverted vendor checks to her own personal bank account. When vendors did not receive their payments, she led them to believe that they had been lost in the post.

 

#2 Customers saying they already paid

Let’s say your financial team sends a bill to a customer and they say that they already paid it, this is one of the warning signs of internal fraudulent activity. The embezzler may not have updated the financial records to say the customer was paid. Instead, the fraudster directs the money to themselves.

 

#3 Possessive behavior over information

One of the common red flags is if employees are acting very protective of information at work.
They may want sole control over dealings with the likes of financial records and accounts. You might find that they refuse to delegate it so management and the accounting team can’t see what they are doing.

The employee may also get edgy if you offer to help with some of the tasks that they lead. Also, they may access the office at strange times in the day.
They may not want to allow anyone to get too close to their work desk and their things so that it could derail their embezzling. These red flags could all indicate that employees are stealing money from your place of work.

Segregating duties and using the 4-eyes-principle can help combat embezzlement and employee fraud in your business.

 

#4 Cash missing

Missing cash from one of your business accounts is one of the signs of employee embezzlement. If employees are in a desperate situation, they may:

  • Take petty cash
  • Shortchange customers
  • Steal from a safe
  • Steal from the cash register

Keep records of cash balances and check your takings align with what has been sold. That way, you can detect embezzlement if cash keeps going missing.

 

#5 Reduced profit margin

If your business faces a decreasing profit margin and you have exhausted an investigation, it could be a sign that a worker is taking money from the company.
Be sure to do an audit of the finances to check if any fraudulent operation has been going on.

For example, in the UK, a woman embezzled nearly $1.9 million from a metal recycling company. After looking at business records, a senior partner in the company realized that funds were down. This red flag prompted an investigation and the billing scheme fraud was discovered. The theft enabled her to spend on personal purchases.

Without the right detection and prevention measures, cash can leak out of business accounts for a long period without anyone noticing. That’s why it’s critical to have the right policies set up.

#6 Missing financial documents

Missing documents or paperwork are warning signs of embezzlement in a nonprofit. Anything that could leave a trace or an indication of fraudulent activity may be stolen, hidden, or destroyed by embezzlers.

In one case, missing paperwork that would have explained payments on the office bank account caught the eyes of staff. In the end, the finance director was found to have been sending payments to himself and put it down as business costs.

This case of breaking the law amounted to more than $600,000 of stolen money. Another impact was that due to the theft, the company profits were understated from March 2007 to 2013. As a result, the company collected penalties and interest, for being outside of the law.

 

How to prevent embezzlement

There are several ways to prevent embezzlement.

  • Conduct regular, unannounced audits of finances
  • Listen to staff if they raise a concern and investigate it thoroughly
  • Also, explore a platform that can protect you if you are embezzled

Trustpair does this by continually auditing banking data and payments ahead of them being made. Our fraud detection software will flag and block any suspicious activity. We efficiently detect and prevent fraud from happening and have many features to enable efficient risk management.

 

What do you do if you suspect embezzlement?

  • The first step is to investigate the matter thoroughly and alert the right legal authorities
  • Conduct an audit of finances, this is how to prove someone is embezzling money
  • Avoid making baseless accusations, time will tell whether their actions are legal

Recap

Beware of the signs of embezzlement which include possessive behavior and cash missing. If you detect any red flags, make sure you issue a warning to top management so they can alert the authorities. Have prevention and detection methods in place to help avoid the risk. Protect yourself against the financial effects of embezzlement by working with Trustpair. Bank data and payments will be continuously audited to keep on top of suspicious activity and cash won’t go missing.

FAQ

When they’re employees of the defrauded business, embezzlers may be private and possessive over their work. They may also work long hours and take little holiday or time off. An embezzler may also be financially unstable, hence the risks they are taking at work by stealing cash. Warning signs could include living above their financial means, reluctance to give access to their work – especially if it has to do with payments, etc.

The most common form of embezzlement involves cash going missing. It is the easiest to get away with. That is especially true if it is a worker on their own who takes a lot of cash in hand and can access lots of cash in the business. This could be an employee from the financial team, the accounts payable, or the accounting team… That’s why it’s important to have processes and tools set up to prevent this type of fraud and avoid losing cash.

Trustpair blocks the financial impacts of embezzlement. This is done by continuously auditing banking data and payments before they are made. Any suspicious activity is flagged and blocked. A warning is directly sent to financial management.

Our fraud prevention solution helps prevent many types of fraud: for example, vendor fraud, employee fraud, CEO fraud… We enable financial teams to handle fraud risk globally thanks to a collaborative and intuitive platform. Teams save time and money thanks to automation and cutting-edge technology.

Manage the risks related to corporate treasury.

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