We have already published signals that can indicate internal fraud or other malversation in various previous editions of our GHH Senior Prevention Guide. At the request of a professional organisation we recently drew up a list of signals appropriate to small and middle sized business. This list has now grown to over 100 signals. Considering the length of this list and the general interest for companies and organisations, we decided to publish the list on our website. This list will be regularly updated and we would appreciate your suggested additions.

Signals that indicate possible internal fraud with goods or money

1. Demonstrable shortages without administrative accounting, often described, for ease, as shrinkage.

2. Internal or external checks show stock differences or procedural errors.

3. Anonymous reports to management that may be from the home front, personnel or others.

4. Considerable shortages relating to certain personnel for which they may have taken the initiative or been asked for favours by others in exchange for reductions.

5. A sale of goods by certain salespersons need not lead to a till receipt.

6. Easy exchange, without a receipt, is possible.

7. Clients exchange or return goods with receipts or invoices that are unknown to the company.

8. The discovery of unknown (part used) receipts books near a sales point or in delivery vans. The carbon copy may be missing.

9. Repairs carried out by some employees on the basis of  “Oh, just give me …….”

10. Self-loading by customers without any control at the exit.

11. Personnel arrange ‘special offers’ and make customers aware of them, unasked.

12. Personnel deliver ‘special offers’ to customers at home after working hours. Cash payment is demanded.

13. Personnel carry out repairs or installations for clients at home without invoice or receipt.

14. Goods are brought in for repair according to an agreement or guarantee when these goods, according to the administration, do not appear to have been sold by the company.

15. Goods for which the customer shows an unknown receipt or invoice are brought in for repair.

16. Deliver of goods at unusual times.

17. Your exclusive products are being offered for sale at locations not on your client list and at strongly reduced prices.

18. Regular clients complain about unfair competition.

19. Personnel are sounded out about the receiving of gifts and are asked about exchange trade.

20. Customers only want to be served by one particular salesperson and say they will come back later if that person is not available.

21. Customers only want to be served by one particular salesperson and wait until that person is free if they are engaged with another client.

22. Signals of meetings between drivers/transporters en route on parking places and back roads where goods can be transferred.

23. Unknown transporters or representatives appear on the premises without appointment or a demonstrable reason to talk to staff.

24. No, or inadequate, regulation of staff purchases.

25. Seemingly returned goods credited and then put through as a staff purchase against reduced price. This ensures a correct balance of stock and cash.

26. An unexplainable rise in staff purchases suggests trade or fraud with credit bookings.

27. Making no use of staff purchases can indicate that a person has no interest in the goods but may indicate theft.

28. Multiple uses of staff purchases, including using a colleague’s name, may indicate own trade and false competition (see 17 and 18 above).

29. An unexplainable rise in stock differences in certain attractive product groups, either very desirable, dear or small, or a combination of these traits.

30. There is talk of an uncontrolled stream of goods between branches (inter-branch traffic). The argument of the dispatch workers is that these are rush orders that will be administratively processed later.

31. An unexplainable rise in returned goods or credit notes, often coupled with the handwriting of a certain employee, or concerning a certain attractive product.

32. No check on the actual return of goods.

33. Insufficient administrative safeguards or system to control returned goods.

34. Returns recorded on several staff numbers while only 1 or 2 employees were present at the time.

35. An unexplainable rise of the number of cancelled receipts or mistaken till entries. Also the salesperson  suddenly makes multiple mistakes whilst ringing up an amount.

36. A rise in cash differences or returns coupled to the presence of a certain employee.

37. A rise in the number of  ‘off till’ sales of products with which the client will probably not return such as upgrade tickets, rolls of film, passport photos, batteries, lens cleaner, etc.. The consequence is an increasing shortage in these sectors. The salesperson reckons that the buyer will not ask for a receipt. If the customer does ask for a receipt, striking the ‘total’ key produces a receipt. A signal of this way of acting is the increasing quantity of cancelled receipts and the opening of the till by means of striking the ‘nil’ key or ringing up a small amount with the aim of creaming of the surplus money. (See also 42 to 50 below that also signal this kind of fraud).

38. Returning goods several times with the same receipt with the help of the salesperson, the ‘income’ to be shared.

39. Cash differences in exclusively round figures.

40. No cash differences.

41. Only negative cash differences, often in round figures.

42. Cash surpluses always in round figures.

43. Off till sales, usually in amounts of £9.95, £14.95, £24.95 or such amounts in your local currency. Often there is a store of five pence pieces near the till to use as change without using the till.

44. An emphatic signal of the fraud detailed under 43 is that the till draw is often not closed but frequently found to be ajar.

45. A further point to numbers 43 and 44 is that the till display is often turned away from the customer or hidden behind advertising material.

46. Cashing up at the end of the day shows multiple till openings without demonstrable reason.

47. On checking an X or Y till roll, often a 0 strike or the amount of a carrier bag or some other minimal amount can be seen. This may indicate the intention to open the till between sales.

48. Between sales openings of a till usually take place at particular times such as coffee, lunch or tea breaks or at times when there are no other people around.

49. Surplus cash often indicates the temporary impossibility for the fraudster to take cash that has not been rung up.

50. An abnormally high need to change money, or withdrawing more money than is really changed, often has the intention of creaming off the fraudulently created surplus cash.

51. A strong rise by one salesperson of the number of sales (increase in bonus) as against their colleagues can mean the sales of extra guarantees or maintenance contracts without the client being aware of it.

52. Clients wrongly reporting to the rear door of the premises.

53. Storage of stocks at temporary locations, often near the exit or on top of lowered ceilings, for example in toilets.

54. Rear doors or side doors which, against the rules, are often found unlocked.

55. Shifting turnover to cheaper products or services by which means the number of sales remains the same but the average sale drops.

56. Unexplainably high expenditure patters of one or more members of staff.

57. Discovery of offers of your own assortment on notice boards in supermarkets and other places with only a telephone number, whether or not the number of a member of staff. In particular, mobile phone numbers deserve attention.

58. Personnel who are always the first to own the newest, dearest and most trendy articles without having purchased this from staff sales.

59. Personnel who rebuild their home with materials that the employer sells, without having made use of staff sales.

60. The borrowing of company products or tools without proper registration whereby the borrowing may become permanent.

61. The lending of goods to employees with a lending ticket without checking that the ticket is not used to take goods every day.

62. Personnel wearing clothing made by the employer without having made use of staff sales.

63. Unexplainable rises in breakages or losses.

64. Higher turnover of items that fall under the heading ‘useful for home’.

65. Keeping storage places untidy and dirty despite repeated instructions to make them clean and tidy.

66. Employees who voluntarily take upon themselves unpopular tasks such as taking out the rubbish, cleaning after working hours, etc..

67. Employees who noticeably frequently find an excuse to “just pop out for a minute” and often carry goods outside.

68. Regularly discovering empty packing boxes in the stores in between full boxes, or discovering packing materials in other places.

69. An increased frequency of reports of faults in delivered goods.

70. Faults noted by the same employee despite other personnel carrying out the same checks.

71. Personnel repeatedly fail to follow instructions such as daily bank deposits of cash.

72. The seeming forgetting of important daily tasks such as switching on the alarm, closing doors, or storage of expensive property in special cupboards being followed by a break in or ram-raid.

73. Branch employees ‘forget’ to report losses or other unusual events or are repeatedly the ‘victim’ of an unfortunate incident or circumstance.

74. Checks or opening and closing times show deviations such as extremely early or late times, whether or not on the same day every week.

75. Opening the premises during closing times to show round family and friends etc..

76. Ringing up packed goods of various quality and cost for the same price.

77. Giving the customer various goods but only passing the cheapest article past the scanner. Security measures are removed and all articles are bagged as normal.

78. Allowing theft by acquaintances and when the alarm at the exit sounds has a ‘friendly’ (security) colleague carry out the bag check.

79. The salesperson attaches a bar code for a cheap article to their wrist and scans this but acquaintances take dearer articles. Also in this case the till display window is often covered or turned away.

80. The giving of reductions by the salesperson to the purchaser without this reduction being registered and the article subsequently being returned for the full amount.

81. Third parties such as suppliers, collect-clients and drivers are discovered at business locations where they should not be, promptly followed by a report of shortages that are put down to the unregistered visitor.

82. Certain salespersons who, with a certain regularity, certainly higher than average, are found to have accepted false or stolen credit cards or other false documents. This often indicates collusion. In exchange for accepting the false card or document the salesperson may add an extra amount to the invoice. The difference is subsequently taken from the till without a loss showing.

83. The discovery of non-branch products on the premises can indicate the presence of a private-shop-within-a-shop. For their own account, one or more employees buy products for cash and sell them on. Barmen/maids may also bring their privately bought bottles and sell them at bar prices, pocketing the income.

84. A fraudster is often recognised by his or her own deviant behaviour. Exaggerated preparedness to do extra or work overtime have already been mentioned, but note also a reticence to delegate, or not to take holidays or only take short ones. Delegation or absence could lead to discovery.  Someone keeping everything locked up when other employees would not, or breaking off telephone conversations when someone approaches may be indications of fraud.

85. If a company closes for an annual holiday period, the amount the fraudster has ‘lost’ during the enforced holiday period will often be made up during the days after a return to work. The result is a sharp increase in the company’s losses during this period.

86. If a sudden rise in telephone or Intelnet costs is noted, it may be a good idea to ask for a specification or check the computer log. This may reveal visit to pornographic sites or telephone numbers, or surfing the net at the company’s expense.

87. Sometimes physical characteristics play a role. The most frequently seen in perpetrators whose motive is prestige is the possession of company keys or a key-card with general authorisation. Such a person derives status with every jangle of their key ring or use of the card.

88. Purchase invoices, usually with round figures, which in contrast to the majority of the purchases are paid in cash.

89. Increase in the number of written credit notes, whether or not coupled to a rise in the total amount per month/quarter. Often the same member of staff supplies these to the same client or small group of clients.

90. Over the counter sales often, against the rules, made against cash receipts so that because of the lack of a customer’s name or specification, cannot be properly checked.

91. The sale of surplus company goods, old metal, pallets and rejects by one employee without any form of administration.

92. Income from repairs kept out of the books because of the relationship with the client or for ease: “Just give me  …..”

93. Exchanged articles insufficiently administered and possibly used for the system ‘two old ones make one new one’. The income is divided between the employees concerned.

94. Self-loading by clients or external drivers without checking.

95. Unchecked deliveries by company or external drivers.

96. Unwarranted high cash balances.

97. Lack of daily check of till or safe balances.

Signals which indicate a possible internal fraud with time

1. Personnel who, seemingly self-sacrificingly, take over their colleagues’ tasks whilst they have lunch and coffee breaks. This time can be used for taking money from tills, helping their own clients, or putting goods ready to take later or even loading goods into their own vehicle.

2. Personnel who offer to work overtime or who create overtime.

3. Overtime which always takes place with the same group of volunteer colleagues.

4. Personnel who send their colleagues home whilst they stay late to cash up or lock the premises.

5. Reporting sick according to a fixed pattern such as an annual event, good weather, during holiday periods, to coincide with a sporting fixture, or before or after a weekend.

6. Signals that indicate employment for other employers whilst they claim to be sick, such as not being reachable, fixed patterns of sick reporting, no complaints about reduction of salary.

7. Clients complain that a representative does not visit despite reports submitted by the representative that states a visit has taken place.

8. Raising the hourly rate by declaring unworked (over)time.

9. Carrying out work for his or her own business, or a family business, or for another third party. Working in the same sector on a temporary staff basis.

10. Regularly preparing private commercial work on the firm’s premises during working hours, evenings or weekends.

11. Lack of control over presence of employees.

Signals that indicate possible internal fraud with data

1. Tenders are rejected more frequently. This often follows a palace revolution whereby a number of crucial members of staff have left the company and begun for themselves. After their departure it may be thought that the situation is under control. However, they may have left a collaborator behind who leaks information to them.

2. Competitors know your technical innovations, plans and formulas.

3. Merger or takeover plans leak out.

4. Commercial data, turnover figures, client lists or buying details seem to be known ‘outside’.

5. Rumours keep surfacing about the willingness of personnel to supply information for money or simply out of rancour.

6. Loss of clients without any clear explanation.

7. Unexplainable drop in turnover.

8. Clients and other marketing data are offered to competitors.

9. Unexplainable mistakes and disturbances in the computer system.

10. Instructions for operating computer programmes are not adhered to.

11. Computer files are altered or disappear.

12. Financial statements and till rolls are missing or ‘accidentally’ destroyed.

13. Production details, stock figures relating to (outside) stores, raw materials, and finished products are incomplete or missing.

Of course, on the basis of function, nature of the undertaking, and organisational form, combinations between the above headings are possible.

To be continued…

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