Fraud against Customers and Organizations by Their Own Employees Increased Significantly in 2012

By Michael Klazema on 2/18/2013

Fraud is a serious crime, and unfortunately, it often occurs from within the organization itself. According to the Staff Fraud Database of CIFAS, insider fraud increased in 2012 by over 40%. That’s in comparison to 2011 numbers. This increase occurred in several areas, including the fraudulent obtainment of employment, staff theft or deception, and the personal use of customer data.

In 2011, there were 378 cases of reported insider fraud, while in 2012 that number rose to 539. 268 of those had to do with some kind of theft or deception and 171 stemmed from application fraud at the beginning of employment. This shows an overlap of crimes coming from the same people and continuing throughout employment.

The most problematic type of fraud, as noted by CIFAS Communications Manager, Richard Hurley, comes in the form of gaining employment through dishonest means. While applicants might fill out a thorough application, much of that information could easily be falsified. If the company does not perform thorough background checks, those lies are missed. In other cases though, a background check is run, but the information on the application is a case of identity theft, and so the wrong person’s history is reviewed. Once these fraudulent applicants make it into the organization, they then have access to sensitive information, making it easy to carry out more crimes, either against the company or the company’s customers.

Once hired, the next most common type of insider fraud has to do with stealing money from customer accounts or the company itself. This type of crime saw a spike of 22% in 2012. While some believe this to be due to the struggling economy, others think the increase only shows more successful convictions and record keeping. This could mean companies have gotten better at catching thieves in the act and that such crimes have always been this high, but the steep rise is alarming no matter the reason. Hurley commented that these types of fraud can have a negative “impact on balance sheets, customer confidence, and staff morale.” It can even cause the organizations to be subject to law suits and other legal punishments.

As a result, companies everywhere are cracking down on employee vetting procedures. Some are undergoing training to help them spot worthwhile and honest employees, and still more are hiring outside organizations to make sure the proper measures are being taken. This ranges from everything from fingerprinting and identity verification to reference and criminal records checks. Hurley says these beefed up background checks before employment is worthwhile, because “the cost of employing someone who has made fraudulent declarations about their employment skills and history is more than financial.” It can end up hurting a company’s reputation, which in this economy, might be difficult to recover from.

Although not every case of fraud can be stopped, with a thorough background check from, companies can have access to some of the most accurate databases in the US. The identities of potential employees should be verified with products like US OneTRACE, which takes the given SSN and traces all names and addresses associated with that number. To make sure potential employees have the education and experience required for the job they’re applying to, companies should also use products like Past Employment Verification and Education Verification to confirm a given history. If employers are able to determine more fraud from the start, they will consequently be able to decrease the amount of insider fraud their company suffers from down the road.

About - - a founding member of the National Association of Professional Background Screeners (NAPBS®) and cofounder of the Expungement Clearinghouse - serves thousands of customers nationwide, from small businesses to Fortune 100 companies by providing comprehensive screening services. Headquartered in Dallas, Texas, with an Eastern Operations Center in Chapin, S.C., is home to one of the largest online criminal conviction databases in the industry. For more information about backgroundchecks’ offerings, please visit



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