Global specialist insurer Hiscox said US businesses affected by employee theft lost an average of $1.13 million in 2016, with small and mid-size businesses representing 68 percent of the cases.
Median loss for these SMEs was $289,864.
Funds theft occurred in one-third of reported cases while check fraud occurred in 22.1% of the cases. Seventy percent of check fraud cases took place at companies with fewer than 100 employees, Hiscox said.
Worse, employees who embezzle are often trusted members of a company's team. "It can be incredibly devastating to find out they have been ripping you off," said Doug Karpp, crime and fidelity product head at Hiscox, as reported by Elaine Pofeldt for CNBC.com
Despite this, just 1% of small business owners consider crime or vandalism an issue in the organization, according to the CNBC. SurveyMonkey Small Business Survey.
Hiscox’s study also revealed that:
- Across industries, financial services firms had the highest total losses, collectively losing more than $120 million last year alone;
- Most of the highloss cases took place when an employee repeatedly diverted small sums of money over time, making detection difficult.
- In 28.7% of the cases, the theft took place over a period of more than five years. Average loss for crimes committed across five years or more was $2.2 million.
- The loss was $5.4 million for cases committed for a period of more than 10 years.
- Median age of perpetrators was 48 for women and 49 for men. In cases of funds theft, 56 percent of the perpetrators were women.
Karpp offered suggestions to small-business owners on protecting themselves against employee theft.
- Institute checks and balances. “Never let one person have end-to-end control of funds,” he told CNBC.com. Bank statements are also ideally sent directly to the owner’s home. “Otherwise, an employee might be able to cover up unusual transactions in the company’s books.”
- Watch employee behavior. Look for extravagant purchases or lifestyle habits incongruous to employees’ financial means. Often, embezzlers demonstrate behaviors of model employees: being curious about how the company works, helping solve system problems. “They are diligent and ambitions. They come in early. They work late. They never take a vacation,” Karpp said.
- Press charges and publicise. “This will show other employees you take fraud seriously. It will help repair any damage to company culture that exists when employees are found stealing.”
- Learn. Many business owners never recoup their losses and are simply forced to move on.
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