How do I Prevent Employee Embezzlement?

Employee embezzlement occurs when an employee steals entrusted funds from his or her employer. This common crime is often difficult to detect, as many embezzlers work very hard to cover their tracks. In order to reduce the opportunity for employee embezzlement, it is necessary to employ a careful plan of security with multiple safeguards in place.

Preventing employee embezzlement begins at the interview desk. If a potential employer likes the resume and personality of an applicant, he or she may not bother to check references or perform a background check of any kind. Since embezzlers tend to leave a suspicious trail from job to job, it is very important that all potential new hires have references that can speak to the applicant's honesty. In positions where the employee will have access to cash registers, deposits, or other funds, it may also be wise to run routine background checks on all potential employees to see if a past history of criminal activity exists.

Though reasonable background research can help eliminate some potential for employee embezzlement, it cannot totally remove the risk. To reduce chances of internal theft even farther, it becomes necessary to create a scrupulous security system that eliminates most of the opportunity for embezzlement. No one employee should have access to all funds, and, if possible, all financial reports and deposits should require at least two employees to independently assess and sign documentation.

Internal auditing can be a good way to cut down on the risk of employee embezzlement. Performing a quarterly audit using an independent firm can quickly turn up any signs of misappropriation or missing funds. Some experts recommend keeping audits random, rather than on a strict schedule, since an embezzler may be able to cover his tracks if he knows an audit is scheduled ahead of time. Internal auditing can also have the benefit of pointing out holes in an internal security system or problems with department efficiency, so a regular policy of auditing may be beneficial to a company in multiple ways.

Though caution and security are important concerns, steps taken to eliminate employee embezzlement can backfire if employees are wrongly accused, or feel violated, spied on, or disrespected by security policies. Imposing extreme measures such as constant camera surveillance, or lying about security policies in order to “trap” thieves can destroy employee morale and trust and lead to a very unpleasant work environment. If employees feel hostility toward the company for dishonest or disrespectful behavior, they may have more motivation to commit crimes or to not report suspicious activity by another employee.