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Fraud mask

Importance of employees in fighting workplace fraud

Monday, July 12, 2021 @ 11:27 AM | By Jennifer Lynch and Margot Mary Davis

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Jennifer Lynch
Margot Mary Davis %>
Margot Mary Davis
Recently, we published a piece about combating occupational fraud, a serious threat to many businesses. We noted that businesses should adopt internal controls that make it difficult to commit fraud and have workplace cultures that are anti-fraud. Today’s advice specifically focuses on employees.

No serious program to combat occupational fraud would be complete with consideration of employees. Employees are, obviously, a source of potential occupational fraud but can also be invaluable in detecting fraud. Here, we provide a plan that reduces the chance of employees committing fraud and includes employees in the fight against fraud.

Adopt smart hiring practices

A great way to combat workplace fraud is to avoid hiring individuals with personality types and traits that are associated with fraud. Admittedly, a significant number of occupational fraudsters are first-time offenders, but certain personality types are more likely to represented among occupational fraudsters. A disproportionate number of fraudsters are psychopaths.

The “Levenson Self-Report Psychopathy Scale” tests for psychopathy and common indicators of psychopathy like impulsivity. Employers should have potential employees complete this scale during the interview process. While employers might be concerned the test might scare honest future employees away, they do not need to worry. The scale carefully cleverly asks if the test-taker gets easily bored and gives up easily. 

Do not give employees an excuse to rationalize fraud

No one would want to work at the place with poor pay, grumpy management, undefined expectations and favouritism based on unjustifiable grounds. Not only would no one want to work at such places, these places are potential occupational fraud-breeding grounds. Numerous studies show that employees’ perceptions of being underpaid or feeling that they are treated unfairly is associated with an increased chance of theft. Fraud theorists note that one type of rationalization is “I feel underpaid/undervalued. Therefore, stealing from my company is justified.” 

While no business can completely prevent employees from holding such views, they can reduce the chances of employees holding such views. Employers should arrange fun events for employees, have birthday events for employees, pay above minimum wage, if possible, and ensure punishments are reasonable. Businesses should avoid having one or two employees play the scapegoat role and relatedly, avoid being selectively lenient with employees

Help employees face challenges outside workplace

After work ends, employees do not disappear into thin air. Employees have lives outside of work and a bright line does not always exist between their personal lives and their work lives. Sometimes events occurring in an employee’s personal life can increase their chance of committing occupational fraud.

Gambling addictions are associated with an increased risk of fraud; people with this expensive addiction need to pay off their debt. Related, 80 per cent of people with drug addictions steal from their workplaces. Similarly, employees who live beyond their means are more likely to steal from their workplaces. Therefore, workplaces should consider providing mental health benefits that cover the cost of counselling.

Recognize role employees play in fight against fraud

Employees are resources in the fight against fraud; employers need to realize this fact. When “fraud training for employees” exists, the median loss for a company is 38 per cent less than for companies without such training. Employees detect and report half of cases of occupational fraud. Therefore, businesses should provide regular seminars about detecting fraud, have an easily-to-consult reference about occupational fraud and provide a user-friendly mechanism, like the hotline mentioned in the prior article, to report fraud.


Occupational fraud is an unfortunate reality for too many businesses that can never be truly eliminated. However, with certain proactive steps, business can strongly reduce its chances of being targets of such fraud. In this two-part series, we provided comprehensive and evidence-based fraud-busting tips. Rotating tasks, avoiding insular workplace cultures and treating employees well can go very far in preventing occupational fraud. When it comes to occupational fraud, an inch of prevention is truly worth a pound of cure.
This is the second part of a two-part series. Part one: Fighting workplace fraud

Jennifer Lynch is an accomplished forensic accountant and business owner. Jennifer is a Chartered Professional Accountant, Certified Management Accountant and a Certified Fraud Examiner who has a reputation for expertise, quality service to clients and professionalism. You can reach her on LinkedIn. Margot Mary Davis is a 2018 Ontario call to the bar. She is interested in policy issues surrounding law like combating counterfeit goods and developing sui generis policies for orphan drugs. She is also a published author.

Photo credit / Jack_Aloya

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