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How to Detect Employee Fraud - Malicious Insider Protection

by Veriato | Jan 21, 2019

How to Detect Employee Fraud

The greatest risk to a company is actually its own employees. Malicious insiders can commit employee fraud in many different ways: data theft, timecard theft, and monetary/asset theft are just a few types of fraud to keep on your radar. Here are four tools and practices you can adopt to detect employee fraud should it happen in your organization.

  1. Establish baselines. Establishing what’s “normal” for an employee is critical to being able to detect any fraud. The baseline acts as a reference point for any user activity, so you will have a gauge for what is appropriate for that employee. For example, if an employee who rarely sends large emails containing attachments begins doing so, the activity could indicate data theft. If an employee regularly logs in at 9am and actively uses a job-related application for a few hours, but then you begin seeing later logons or less time spent in the application, you can assess a reduction in productivity. These changes in behavior are only detected if a baseline exists.
  2. Deploy employee monitoring software. A great way to establish a baseline and then detect abnormal activity is to deploy employee monitoring software. This software monitors user behavior and alerts your IT team if there is any suspicious activity. This eliminates human error in detecting fraud, reduces man-hours spent on menial monitoring tasks, and actually helps protect your employees privacy, as their activity doesn’t need to be reviewed if it remains within normal parameters.
  3. Watch for red flags. It’s also a good idea to keep an eye on your employees lifestyles and habits. Employee fraud can often be detected by watching for red flags such as:
    • An extravagant lifestyle that doesn’t match the employee’s salary
    • Regularly staying late and working on weekends
    • High number of write-offs or robust expense account
    • Shortage of inventory
    • Employees who act above the rules
  4. Implement a whistleblower hotline. One of the best ways to detect employee fraud is through tips by other workers. The ACFE 2016 Report to the Nations revealed that 39.1 percent of employee fraud cases were detected through tips. Cultivate an environment where employees believe they will be taken seriously if they report someone. By utilizing your own employee base to protect your company assets, you are able put more eyes and ears on the ground to catch any fraud. In addition, just the knowledge that fraud tips are taken seriously is often a deterrent for malicious employees.

Employee fraud should be a concern for every organization. By utilizing these tools and tactics, you will be able to detect employee fraud, minimize damages and hopefully deter any other instances.


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