9 Most Common Fraudulent Activities in the Workplace


As an employer, you should trust your employees. When you hired them, you must have seen something worthy of your trust, besides their expertise.

Great employees will give you their best if they know you trust them. But not all employees are great, and even the latter go rogue sometimes. They could be perpetuating fraud right under your nose. Behind the fake smiles and “yes boss” remarks, behind all the sucking up to you, they could be engaged in fraudulent activities behind the scenes and sometimes in plain sight.

So, how do you smoke them out? Here are nine potentially fraudulent activities in the workplace you should look out for:

1. A Shrinking Inventory

Theft is one of the most common fraudulent activities in the workplace. Granted, marginal shrinkage in inventory is understandable, even expected, when moving items. However, if it is excessive, fraud could be happening in plain sight. It’s not difficult to flag down inventory-related crimes. During an in-depth and professional corporate investigation, an auditor will notice any drastic drop in the inventory and call it out.

All they need to do is scrutinize the balance sheet, products sold and those in stock. If they don’t add up with the previous figures and projections, something is amiss. Impromptu random stock-taking is another strategy of catching fraud in action.

2. Disappearing Documents

If documents start missing for no apparent reason, especially from critical departments in your organization, your eyebrows should go up. If the disappearances are too frequent, fraud could be in progress.

Among missing documents that should raise red flags are chequebooks, a list of purchases and sales, motor vehicle registration, and inventory reports. The disappearance of such records could be an indication someone is about to commit or cover fraud.

3. Multiple Payments

An employee could mistakenly or erroneously make duplicate payments to a vendor. While this may be an honest mistake devoid of malice. In such a case, the concerned officer should, upon noticing his or her error, report the incident to allow corrective action to be taken.

There are, however, instances where an employee fraudulently makes multiple payments. This could be to either non-existent or genuine clients. In this case, the intention is to defraud the employer. To ensure that such cases do not happen, verify and monitor all payments to ascertain they are routed to the right parties.

4. A Sudden Spike in the Number of Invoices

As a business grows, it might initially see dramatic spikes in the volume of invoices it generates. This could be explained by a drive to increase market share. As much as this is excellent news, it’s a fertile environment for fraudulent tendencies. External and internal parties might try to benefit from the rapidly accelerating growth.

Since things are happening too fast, and invoices are being printed endlessly, the chances of fraud happening undetected are pretty high. Make sure every invoice is vetted, verified and tracked. Also, ensure that all payments are recorded, indicating the amount and volume.

5. Incessant Complaints

If there are too many complaints about a particular employee, there is likely a justification for it. Smoke always denotes the presence of fire. In this case, fraud could be the reason for the complaints. Upon receipt of such complaints about certain personnel, launch investigations to get to the root of the matter. Should fraud be confirmed, quickly address the issue and restore confidence in your company.

Complaints could range from routine under-packing of items such that delivered items are less than what they ordered. If the error is proved to be intentional, the offending party should be reprimanded.

6. Too Many Adjusted Entries

If there are too many adjusted entries in the account books, someone may be trying to cover their tracks. If the adjustments dramatically alter financial reporting in a given period, fraud may have already occurred. While some adjustments may be legit, they must be accompanied by an explanatory note giving reasons for the adjustments.

7. Sudden Changes in Lifestyle

If an employee suddenly changes their lifestyle to the extent that their known income doesn’t justify their newfound largesse, covertly investigate them. Red flags include purchases of luxury items, top-of-the-range vehicles, or holiday homes, expenses that are not supported by their paycheque. Although there could be legitimate reasons for the changes in lifestyle, such as coming into inheritance money or winning the lottery, always investigate unexplained, abrupt lifestyle changes as they could indicate fraud.

8. History of Endemic Debts

Always conduct background checks on employees to establish if they have a history of debts. Such employees are likely to actively look for opportunities, including illegitimate ones, to pay off their debts. They may not think twice about taking advantage of or initiating fraud.

9. Habitual Gambling

People who engage in gambling are hoping to get rich quickly. Soon, they find themselves trapped in the allure of this addictive habit. Since their salary is not enough to fund their gambling addiction, they might do whatever it takes to earn extra cash, including committing fraud. Besides stealing the company’s assets, they are likely to manipulate the inventory or lodge extraneous claims for money.

Any of the above activities may be an honest mistake on the part of an employee. However, this could also be a sign that fraud has taken or is about to take place. The best policy to adopt is to trust and then verify before taking action.