Employee Embezzlement Soars – Can Background Checks and Credit Checks Help?

By Michael Klazema on 5/16/2013

By all indications, employee theft and embezzlement is thriving in today’s business economy. In order to protect themselves from rising rates of theft and embezzlement, employers need to use every tool at their disposal, including criminal background checks.

According to the 2012 Report on Embezzlement from analyst Marquet International Ltd., 2012 was a “blockbuster year” in terms of municipal and corporate embezzlement. The average loss in the 528 major embezzlement cases included in the study was $1.4 million dollars.

Other facts revealed by the study, which also compared data from a 5-year backlog of embezzlement cases, include some interesting points about gender. Women are more likely to embezzle than men, at least on a large scale. Yet when men do decide to embezzle large amounts, the amount they steal far outstrips that of women.

The study also found that fewer than 5 percent of embezzlers stealing over $100,000 had prior criminal convictions. This poses a problem for employers. If these individuals had no criminal convictions, presumably a background check would not have returned any red flags on 95 percent of these future criminals, and they would have been hired with no reservations whatsoever.

However, by digging deeper into the study, employees may find evidence to support the use of credit checks as a means of screening out job applicants who may eventually turn to theft or embezzlement. Credit reports, like those offered by, can reveal potential sources of financial stress in a job applicant’s life. Since the Marquet study revealed that gambling debts come into play in many high-profile embezzlement cases, it stands to reason that detecting financial stressors can be useful in predicting potential embezzlement risks.

While some states restrict the use of credit checks, it is generally agreed that credit checks are permissible for any position where financial history has a direct bearing on the job responsibilities. For example, someone in the finance industry or someone who will hold the purse strings at a non-profit company both need to demonstrate an ability to manage money wisely.

The Marquet study found that financial institutions suffer the highest frequency of embezzlement, and the most common method of embezzlement is forged or unauthorized checks. In other words, most high-profile embezzlement cases involve employees in financial positions or with easy access to money. One has to wonder how many of the embezzlement crimes included in the Marquet study could have been prevented had credit checks been run on all of the employees involved.

Going forward, the Marquet study predicts that embezzlement trends will continue to rise as employees struggle to cope with continuing economic distress in the country. Employees over 40 are seen as a particular risk because they may be contemplating padding their retirement funds with ill-gotten gains. The states of Iowa, Hawaii, Nevada, Wyoming, and Illinois were identified as being at the highest risk for large-scale embezzlement.

Embezzlement isn’t just a concern for big businesses. Small businesses and non-profits should also keep a close eye out for employee theft, and use every tool at their disposal to try to hire the best, most honest employees they can find, particularly for positions of financial responsibility.


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