10 Signs of Fraud and How to Deal With It

When the signs of fraud appear on the horizon, you can’t afford to ignore them.

No one can–businesses are losing $190 billion a year to credit card fraud alone. And for an individual, the cost can be even more daunting–a ruined credit score, lost income, and more ugliness you’d rather not think about.

What are the red flags for fraud? Keep reading to find out.

1. Erratic Reporting

One of the first screaming signs of fraud? Reporting issues.

This can come from employees, management, contractors, even suppliers. A late report is one thing, but frequent lateness, incomplete reports, or reports that come laden with apologies and excuses are classic warning signals.

Why? Because incompleteness or excessive excuses are common tools used to deter anyone from looking closer at what’s wrong in the reports themselves. Examination of what’s missing or nonsensical will often point to what’s wrong.

Common excuses to watch for include IT failures or system incompatibility.

If this happens, demand scheduled, up-to-date reporting and try to use enterprise-wide technology so that incompatibility isn’t possible.

2. Missing Documents

Along similar lines, you should keep a close eye on missing documents.

Now, it isn’t uncommon for documents to be misplaced at work–we’re only human, and accidents happen. But if records go missing on a regular basis, then you should be concerned.

Especially if checks and receipts go missing.

Keep an eye on what documents are MIA. Presentation notes from last year aren’t as important, but financial records should always be accounted for.

And if documents go missing, make a lot of noise to figure out what happened to them.

3. Data Inconsistencies

As with several other signs of fraud listed here, some data inconsistencies are the result of a natural human error.

This is, of course, one of the arguments that fraudsters will often use to conceal what they’re doing.

As such, you should take the appropriate precautions to prevent data inconsistencies. For example, no employee should be able to delete a file without administrative approval. There should also be electronic backups as part of your digital compliance.

4. Dumping

As a rule, if you feel the pressure to dump data, or hear that a company is dumping information, you should be hearing warning sirens.

The easiest way to cover up a fraud? Delete all the evidence that it ever happened.

And if you hear the sentence, “I’m sorry, those documents were destroyed,” you should be extremely alarmed.

One way to counteract this is to make sure you have paper copies of documents and have logged where they’re stored. There should also be a system in place of where those documents can and cannot be stored.

You should also make sure that scanning and indexing are in working order, and that they’re secured. No one should be able to intercept a document or take a copy while you’re scanning.

5. Audit Delays

As you’ve probably figured out by now, delays are generally a red flag.

This is especially true during audit season. You know audits happen every year like clockwork, so there should be no reason to give your auditors the runaround.

However, keep in mind that auditors aren’t there to catch the warning signs of fraud–they’re there to make sure that the appropriate measures are in place to prevent fraud from happening.

6. Multiple Bank Accounts

Remember the Wells Fargo fraud case? Accounts fraud was part of it, and multiple bank accounts are something to watch out for.

Multiple bank accounts are particularly concerning if you’ve never heard of them before.

While more than one account isn’t a crime, it makes inappropriate money usage more difficult to trace.

As such, if you don’t know the exact business need for a specific account and no one can seem to tell you, there’s no real reason for it to be there.

7. Shaky Financials

When considering your financials, as yourself the following questions:

• Does your budget match your financial results regularly?
• Are there any parts of your financial statements that don’t make sense?
• Are your monthly financials delivered on a timely basis?

If the answer to any of these three questions is worrisome, it’s time to take a closer look at what’s happening to your money.

8. Questionable Employee Behavior

Everyone has bad days. Everyone gets nervous. But not everyone commits fraud.

If employees are being unusually cagey about specific processes, or can’t seem to stop babysitting a specific process for reasons you can’t quite make sense of, then you should take a closer look at what they’re actually doing.

If they’re behaving as though they don’t want you to look at something, be sure look at it.

9. IT Work Under the Radar

Many a company lives and dies by their IT department.

But if you have a tech crew working at odd hours, you might want to take a closer look at what they’re doing during those odd hours.

This is especially true if your company isn’t large enough to maintain a full IT department that would catch such red flags through audit trails.

10. Process Laziness

Security systems age and they don’t always hold up against new threats. It’s natural.

In fact, it’s expected–new cybersecurity threats are appearing all the time.

It’s also normal that people neglect stringent protocols when things get busy.

However, for your own security, these protocols need to be enforced. Many a business is lulled into a false sense of security by the presence of those protocols while the fraudster is hard at work behind their backs.

Similarly, if a company shows frequent signs of carelessness, you should be hearing alarm bells–security protocols are in place to protect valuable information, and if the company isn’t paying attention to those protocols, then the information isn’t safe.

When You Spot the Signs of Fraud

When you spot the signs of fraud, it’s time to get a lawyer.

The truth is, you don’t know how long fraudulent activity was going on before you caught it, which means you need to do damage control as quickly as possible.

If you need to find a lawyer, take a look at our lawyer directory. Or, if you need more legal tips and advice, take a look at our blog.