The 2016 Hiscox Embezzlement Study – A report on white collar crime in America

I saw this new study by Hiscox Insurance referenced in an article on Bloomberg and thought my readers might be interested in it, even though its focused more on embezzlement from businesses.

The study shows that white-collar crime is a major problem that all small business owners should be wary of.  Four out of every five organizations that fall victim to embezzlement had fewer than 100 employees and just under half had fewer than 25 employees.  So this is a problem that disproportionately affects small businesses.  The average loss was $807,443 – far more than most small businesses can afford to lose.

The report finds that the ‘average’ embezzler is a 49-year-old woman who works as a bookkeeper or accountant in a company with fewer than 50 employees, and is most likely to work in a company in the financial services or non-profit sector. She may be a long-time, trusted employee who has responsibility for the end-to-end accounts payable or payroll function in her company.

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In some cases, the perpetrator has fallen on hard times and decides to take an unauthorized loan from the company until they get back on their feet. Other times, they feel they are not being paid what they are worth, so they help themselves to a raise. In either case, if they begin by stealing small amounts of money, they may become emboldened if they are not caught, and may continue to steal regularly, until they have pocketed hundreds of thousands of dollars.

Here are some of the primary characteristics of embezzlers the reports says business owners should watch out for:

  • Intelligent and inquisitive  – always wants to know how everything works
  • Big spender  – living beyond means or sudden large purchases
  • Egotistical risk-taker  – rule breaker in and out of work life – from speeding tickets to overusing ‘sick time’
  • Hard worker – immune to stress – in early, out late, no vacations
  • Disgruntled – unable to relax, or experiencing drastic behavioral changes

The report concludes with a list of preventative measures a company can take to protect itself, including the following:

  1. Implement checks and balances
  2. Send bank statements to business owners home
  3. Pay attention to employee lifestyles and extreme changes to them Promote a culture of trustworthiness and integrity
  4. Talk with all employees about fraud detection and internal controls. Have them sign a code of ethics
  5. Complete background and credit checks on employees who will be handling money
  6. Review cancelled checks that come directly from the bank.