Most fraud is committed by its own employees. Many entrepreneurs refuse to believe that. "I know my employees, I hired them all myself. They are not criminals!", is a common sound. According to our annual Benelux fraud survey, 59% of companies experienced fraud (attempts) by their own employees last year. Who are these internal fraudsters? How do you recognise them?

Employees who rip off their employer are encountered at all levels of the company. It could be anyone. However, male offenders are still more common (64% vs 20%). What is striking is that they are often men who have been employed for less than five years. These repeat offenders tend to be men aged between 35 and 45. But beware: the biggest fraud offences are often caused by precisely male offenders between 40 and mid-50s. They are well-educated, hold senior management positions and often have been working for the company for at least 10 years.

Multiple offenders are younger, often less educated and lower in the company's hierarchy. They commit the most crimes in number, but usually smaller amounts are involved and the fraud is often detected early.

The older, more educated fraudster, often with managerial duties, knows the company systems and mechanisms inside out. Because they are often long-serving, they enjoy great trust among colleagues and superiors. This provides them with all kinds of freedoms, including access to confidential systems and information. All in all, an ideal environment to cheat their employer over a long period of time without arousing suspicion. Meanwhile, they are friendly and polite to everyone. When it turns out that they have committed fraud it usually hits like a bomb. They are the last people you would expect it from.

Criminologist Donald Cressey, in the model The Fraud Triangle, describes three main conditions that increase the likelihood of fraud: opportunity, pressure (or motivation) and rationalisation.

  • Opportunity
    This refers to the situation where an employee has the opportunity to commit fraud without being caught. This may be due to weak internal control mechanisms, lack of supervision or easy access to money or assets of the company.
  • Pressure (or motivation)
    This is the motivation or need that drives someone to commit fraud. It may be financial pressure due to debt, gambling addiction or the desire to maintain a certain lifestyle. It can also be non-financial pressure, such as the need to achieve unrealistic sales targets.
  • Rationalisation
    This is the mental justification an individual uses to convince themselves that their fraudulent actions are acceptable or not really wrong. They may believe that they are "borrowing" the money and will pay it back later, or that the company is rich enough to absorb the loss.

"Companies looking to protect themselves from criminal employees face a difficult task. Who should you target? You can hardly start distrusting everyone. That is disastrous for the corporate culture. Also tricky is that they are often not ordinary criminals," says Bernd Noll, professor of economics who researches profiles of white-collar criminals.

"The familiar clichés of criminals do not hold true. They did not have a difficult childhood, nor did they go down the bad path. They are normal people. But what does drive these offenders? Why do they damage their businesses and endanger their own livelihoods? The trigger is often a breakdown in their moral sense," says Noll. "This is caused by a breakdown in their values such as divorce, serious illness or some other profound experience, which can also be hidden."

In his research on offender types, Noll found that greed is a common motive, alongside chronic lack of money. "Fear of social exclusion can also be a motive for crimes. Consider, for example, fraudsters who want to make up for a lack of recognition by parents or spouses through their standard of living. Another common motive is revenge, for example if an employee feels he or she has missed out on a promotion."

"Trust is good and important for corporate culture, but it has its limits," says Rüdiger Kirsch, fraud expert at Allianz Trade. "Lack of control is a licence for fraudsters." According to Kirsch, lack of control is often even the trigger for employees to slip into crime. "Those who enjoy total freedom develop their own understanding of justice over the years," he says.

It is impossible for companies to find out whether a manager has criminal potential, even with expensive selection procedures, says expert Noll. This is also related to job profiles: "There are companies that are specifically looking for managers who are not only decisive and tenacious, but also willing to push the limits of the law." In other words, traits that, to some extent, are also found in white-collar criminals.

In addition, the operational environment of the company also determines the people who work there. If the conditions are conducive to criminal energy, even the best application process will not make a difference. The environment shapes the person.

Many fraud cases go unreported. Companies handle it themselves and want to avoid negative attention. Our annual fraud survey shows that one in four companies handles fraud internally. We also see that companies are increasingly taking measures to prevent fraud.

Most mentioned measures are increasing fraud awareness among employees, additional controls from the administrative organisation and employee screening. Two factor authentication and the four-eye principle are also increasingly applied. A majority of companies see fraud as an increasing risk. 64% say they perform fraud risk analyses and almost 30% say they will invest more to reduce fraud risk. In particular, these companies are putting more money into security audits of their IT systems and into training to raise fraud awareness among employees. More and more companies also have a contingency plan (a roadmap should fraud come to light).

For employers, it is important that employees dare to report a colleague's suspicious behaviour. This requires an open corporate culture: make internal fraud negotiable during meetings and raise it as a topic during performance appraisals. Involve employees in operational management. That way, they will feel more responsible for what happens internally and call each other to account for deviant behaviour.

Furthermore, controls within a company should be effective, but not so strict as to create a culture of mistrust, Noll warns. "If employees do not feel trusted, the company suffers in other ways and that is equally undesirable."

Even the strictest security controls and the most supportive corporate culture will not completely eliminate the risk of internal business fraud. Make sure your company is always protected against financial losses due to dishonest, fraudulent, malicious or intentional criminal acts with our complete fraud insurance.

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