Fraud and embezzlement can impact private businesses, government agencies, charities and churches.
Business professionals learned how to prevent and recognize fraud and embezzlement during a workshop this week at the Emporia Area Chamber and Visitor’s Bureau.
The presentation by Deputy Attorney General Steven Karrer was underwritten by Pete Euler with State Farm. Karrer is in charge of the Fraud and Abuse Litigation Division of the Kansas Attorney General’s Office. He has extensive experience in prosecuting financial crimes, including elder and fiduciary abuse. His presentation focused on learning how to protect businesses from fraud and embezzlement, what policies and procedures to have in place, and what to do if fraud and embezzlement is suspected.
Karrer said fraud and embezzlement cases are unique from other crimes because they can occur over a lengthy period of time. They also require intense investigation and involve a massive amount of documents to be reviewed by investigators. The amount of time and resources required to investigate the cases are often burdensome to small law enforcement agencies which have limited staff.
“These cases are often competing with homicides and child sex crimes and there are limited resources, so they weren’t typically being prosecuted in high numbers,” Karrer said. “But the general understanding is — there is a big need for prosecution but also investigative and educational resources to deal with these crimes. Business owners know that financial crimes are unique in that oftentimes they last over a period of time whereas most crimes are instant, individual events. Financial crimes oftentimes occur over years.”
Karrer offered attendees some tips for preventing fraud and embezzlement. The first was to have proper checks and balances in place regarding finances. Rather than having one employee or individual in charge of the money from the time it is collected until it is deposited in the bank, he recommended having several individuals involved. One person alone should not have complete control over the finances.
When fraud and embezzlement come to light, Karrer said he often hears people say, “I thought something was off but I didn’t want to say anything”. He says avoiding suspicion is the wrong approach. He encouraged attendees to trust their instincts and ask questions related to the finances.
“If you are on a board or financial committee and you have questions about the finances, ask questions,” Karrer said. “Always trust your instincts and ask questions and if you don’t get a sufficient answer, ask more questions.”
Loose cash can be problematic for businesses and can make fraud and embezzlement harder to prove. Regularly reviewing vulnerabilities in organizational financial process can also help prevent fraud. Lastly, Karrer recommended doing spot checks on different areas of the organization finances to maintain a good check and balance.
“Part of the problem is having the time, especially in a small business, is the time to actually go and review these things,” Karrer said. “I can’t give legal advice, but if I had a suggestion it would be to do spot checks. Do a spot check once every couple months of the purchases, look for receipts. If you can do those spot checks and look at various things and let your employees know you are doing it, it is helpful.”
When suspicions arise
If there are suspicions fraud or embezzlement have occurred, there are some steps which can be followed to begin the investigation process. Talking to the accountant used by the organization or business is a good first step. Asking questions and asking for documentation, including receipts, is also beneficial. Contacting local law enforcement and making a report of the concerns will allow an investigation to begin.
Karrer did share with attendees information about the National White Collar Crime Center and how it can assist with training law enforcement and private sector employees on the intricacies of investigating fraud and embezzlement cases. Additional information about the services and training can be found at www.nw3c.org.
In conclusion, Karrer reminded attendees not to feel guilty about having checks and balances in place or questioning the financial processes of their organizations. It is possible to trust employees, yet still have processes in place which provide clarification.