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Asset misappropriation fraud
Asset misappropriation fraud happens when
people who are entrusted to manage the assets
of an organisation steal from it.
More about asset misappropriation fraud
Asset misappropriation fraud involves third parties or employees in an
organisation who abuse their position to steal from it through fraudulent activity.
This type of fraud can be committed by company directors, or its employees, or
anyone else entrusted to hold and manage the assets and interests of an
organisation.
Typically, the assets stolen are cash or cash equivalents, such as credit notes or
vouchers. However, the fraud can extend to include company data or intellectual
property.
At one end of the scale, asset misappropriation fraud may be limited to isolated
cases of expense fiddling or an employee lying about his or her qualifications to
get a job.
At the other end, it might involve organised crime groups infiltrating
organisations to take advantage of weak processes and inadequate internal
systems and controls.
The definition of asset misappropriation fraud doesn’t include straight theft
from an organisation by insiders, such as stealing stationery or other physical
assets.
Ultimately, it’s the cash flow of the business that suffers.
If they’re not tackled, opportunistic one-off frauds can become systemic and
spread throughout an organisation, creating a culture of theft and fraud. When
this happens, fraudsters think their actions are acceptable and fail to make the
distinction between company funds and their own funds.
Apart from the direct impact of lost funds, asset misappropriation fraud can also
impact on an organisation’s staff morale and reputation.
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Asset misappropriation fraud
Are you a victim of asset misappropriation
fraud?
Asset misappropriation fraud could include any of the following:
embezzlement, where accounts have been manipulated or false invoices
deception by your employees
false expense claims
payroll fraud, where payments have been diverted or fictitious, ‘ghost’
employees have been created
data theft or intellectual property theft.
What should you do if you’re a victim of asset
misappropriation fraud?
If you believe the fraud is going on right now, you should contact the police.
They will start a criminal investigation.
If fraud has occurred, contact Action Fraud to make a report.
You should immediately suspend the employee(s) involved in order to prevent
further losses.
You might want to try and recover the stolen funds and start disciplinary or
dismissal procedures.
You should try to estimate the direct losses your organisation has suffered and
find out whether the same fraud is being carried out by other people. If so,
this would indicate there’s some kind of systemic failure across your whole
organisation.
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Asset misappropriation fraud
Protect yourself against asset
misappropriation fraud
Your organisation can take the following steps to help to protect itself from asset
misappropriation fraud:
vet employees thoroughly checking employee CVs and references
implement a whistle-blowing policy
control access to buildings and systems using unique identification and
passwords
restrict and closely monitor access to sensitive information
impose clear segregation of duties
consider job rotation
use tiered authority and signature levels for payments
regularly reconcile bank statements and other accounts
periodically audit processes and procedures
promote a culture of fraud awareness among staff
adopt, and rigorously implement, a zero tolerance policy towards employee
fraud
have a clear response plan in place in case fraud is discovered.
Your organisation also has a responsibility to protect other employers. Simply
dismissing a fraudster enables him or her to move to another employer where he
or she will most likely continue their fraudulent behaviour. Consider taking part
in a fraud data sharing scheme, or decide to prosecute the fraudster when the
fraud is discovered.