As a former auditor part of my job was fraud and theft investigations. Unfortunately there was usually some work to do. Lax controls create an opportunity for theft and misuse, and many people overlook the risk until it is too late. Don’t want people stealing from you? Then don’t give them the opportunity.

Pressure – Opportunity – Rationalization: the Fraud Triangle

Every theft or fraud usually follows the same pattern. Someone wound up in a bad financial position – debt, addiction, loss of income – the list goes on. The pressure cooks and soon enough they stumble upon a weakness in security. They see an easy opportunity solve their problems. But, their conscience bothers them. Stealing is not something they were raised to do. Then they go back to thinking about their financial problems. That’s when they rationalize that it is okay to steal in order to survive. Maybe they feel like they deserve a better life or that anybody else in their position would do the same thing.

This is the Fraud Triangle first identified by sociologist Donald Cressey and is the framework fraud investigators work under to prevent and investigate fraud.

1. How to analyze security reports

Most security systems have the capability of assigning unique IDs to every employee. If you discover something happened immediately after the fact, then a quick scan to determine who was in the building at the approximate time could narrow your suspect list.

But it’s never this easy.

First, if you don’t have unique IDs for everyone in your organization, assign them immediately. This is a weakness in your security.

Second, periodically scan your reports looking for abnormal trends. If you’re a typical eight to five business, activity late at night and on the weekends is suspect. Observe a significant time period and construct trends. Approach the individual if warranted.

2. Eyes

Cameras have become so cheap that most people can afford to watch a live feed of their warehouse on an iPhone. Sure, thieves have plenty of ways to maneuver around a security camera, but having cameras installed and visible and out of reach is a great deterrent.

You should not stop at securing just your premises. Also secure your vehicles. Mobile Watchman is a vehicular hidden camera system. CEO Brian Singer says “The benefits don’t stop at preventing theft and recovering a vehicle, but this product is invaluable in the event of an accident because you have record of the event.” The videos can be used to prove or disprove liability.

Camera Placement

  • Assets, place cameras on what you’re trying to protect, the cash register, inventory, data center, etc.
  • Choke Points or where the perpetrator will travel to access the assets: the parking lot, all entry points including basement and garage.

3. Segregation of duties

Many small businesses do not have the resources to specialize certain duties and keep them separate. Many times the clerical person will handle almost all receivables and payables, and the owner is just interested in “How much did we make?” Allowing employees to have total control over a business process could create an opportunity for theft or misuse. Understanding proper segregation of duties (SOD) practices can help you rethink your business processes to reduce or eliminate the opportunity.

A basic framework for SOD:

  • Custody of assets
  • Authorization or approval of assets
  • Recording of transactions

Take for example a wholesaler. The purchasing agent procures the assets (authorizes), the warehouse manager receives and protects the assets (custody), clerical records receipt and pays the invoice (record).

This transaction represents proper SOD. Had the purchasing agent (authorizer) also paid the invoice (recorder), there would have been an opportunity to falsify the payable.

If you want a good handle on SOD, think about each of your business processes involving high priority assets, cash, inventory, etc. Consider who is the authority, custodian, and recorder. Make sure that each process involves three different people.

4. Monitor offsite deliveries and outcalls

I have investigated and proved many cases of fleet abuse. Drivers using company vehicles to do side jobs, mistreating the vehicles, and even going to bars and drinking alcohol when they should have been on a delivery. These behaviors can cost a company thousands, and even lawsuits in the event that a driver hurts someone while driving recklessly or under the influence.

Dyna Track GPS has a handy ROI calculator showing the benefits of their product which tracks vehicles and produces reports. Implementing a GPS tracking program will increase productivity, eliminate side jobs and shirking, and could even help you increase your logistics efficiency.

5. Always use bonded insured services and contractors

If you hire a cleaning service or work of any kind, require that the service provider carry bond insurance to cover you in the event of theft or damage. Ask to see the certificate. Schedule a Google Reminder to remind you to ask to see it again the following year.

6. Background checks and DMV records

Hiring people who have a proven history of ethical behavior is a good way to prevent theft and misuse. Depending on your business, certain criminal records should disqualify individuals for employment. If you want to consistently hire quality, trustworthy employees, background checks are a wise decision. They come with an expense however, and there are also laws to consider. Backgroundpricecheckquotes can supply you with a few choices for finding a service provider.


How To Position Video Surveillance Cameras

Simplifying SOD