Internal Fraud – when good employees go bad

My StartUp is shining a spotlight on scams this month, showing you how your small business can avoid being taken in by unscrupulous types who would take advantage of your hard work.

Fraud Prevention Month runs throughout March. In this installment of our series of blogs on fraud, a CFIB Business Counsellor highlights how a business can experience fraud from the inside through the actions of an employee.


What is internal fraud?

Internal fraud, also known as occupational or workplace fraud, is fraud committed by an employee. It can lead to financial losses, legal issues, damage to a business’s reputation, and low employee morale.

ss_timesheet_55333474_jpgWhat does it look like?

It could be money missing from the till or merchandise missing from the shelves. It could be employees lying on their timesheet, taking a sick day to work another job, making expense claims that are higher than the actual amount, or making payments to themselves.

Why would my employee commit fraud?

Not all fraud is intentional – everyone makes mistakes – but when it is, it’s usually because an employee feels unhappy in their job. Perhaps they were passed over for a promotion or pay raise, or maybe they feel as though their efforts are not noticed.

What can I do?

Use pre-employment checks to confirm a potential employee’s employment history and request copies of education transcripts – this will help verify their honesty. Create an anti-fraud policy and explain fraud_logo_colorclearly to your employees why you have it and why you’ve chosen the disciplinary routes indicated. Set clear expectations for your employees, and let them know when they’re doing a good job. An employee who feels appreciated is less likely to commit fraud.


Emma Speagell is a bilingual CFIB Business Counsellor in the Atlantic Region.

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