U.S. organizations with less than 500 employees experienced a median loss of $280,000 per year due to employee theft across a wide range of industries, according to a new survey. The 2015 Hiscox Embezzlement Watchlist: A Snapshot of Employee Theft in the US, which examines employee theft cases that were active in the US federal courts during the previous calendar year, found that embezzlement is not just a problem for large organizations or the financial services industry; 80 percent of victim organizations had fewer than 100 employees,and losses were suffered across a wide variety of industries, with an average total loss of $842,403.
With a comprehensive view of the employee fraud landscape, organizations can better protect themselves by understanding the characteristics of a typical embezzler. According to the report, most instances of employee theft involve employees with long tenure. Women represented more than 60 percent of employee perpetrators, while the median age of wrongdoers was 50. The embezzlers were also not confined to the finance operations of an organization. In fact, more than 50 percent of actions were committed by employees not in the finance or accounting function.
Just more than half of all employee theft schemes (53 percent) were perpetrated by employees in senior roles within the organization, with those stakeholders engaging in schemes with a median loss of $313,939. Non-management employees, who perpetrated 43 percent of the schemes surveyed, still left a punishing mark on their organizations, orchestrating schemes with a median loss of $234,641.
Industries at Risk
More than 21 percent of employee thefts in organizations with less than 500 employees involved entities in the financial services category, which includes banks, credit unions and insurance companies. The median loss for financial services organizations was $271,000.
But, financial services companies are not the only ones at risk. Retail entities and the healthcare industry had the largest median losses, at $606,012 and $446,000,respectively. Other organizations with a high concentration of employee theft were non-profits (median loss of $202,775), municipalities (median loss of $293,717) and labor unions (median loss of $41,599).
Outright funds theft, which includes the direct theft of cash or misuse of bank deposits or transfers, resulted in nearly three-fourths of total losses. The single largest loss from outright funds theft in 2014 was a staggering $21 million loss from a bank in the South. Check fraud and credit card fraud were found to be pervasive among small businesses. Eighty one percent of check fraud and 80 percent of credit card fraud occurred in companies with less than than 50 employees.
“Although risk mitigation strategies such as background checks will add a layer of protection, no organization can completely insulate itself from employee theft. Organizations can,however,take proactive measures to minimize the likelihood of theft and the impact of losses,” said Doug Karpp, National Underwriting Leader for Crime& Fidelity at Hiscox. “Even basic controls may have prevented many of the criminal actions seen in our study by creating a ‘perception of detection,’ which is the most powerful deterrent to employee wrongdoing.”
The full survey is available at http://www.hiscoxbroker.com/shared-documents/2015%20Hiscox%20Embezzlement%20Watchlist.pdf