How to Screen Job Applicants to Avoid Potential Employee Fraud

According to the Association of Certified Fraud Examiners (ACFE), an estimated 6% of revenues were lost in 2002 as a result of occupational fraud and abuses. Applied to Malaysian Gross Domestic Products in 2011 which amounted RM 278.67 Billion, this translates to losses of approximately RM 16.7 Billion.

The frightening part is that many of these perpetrators don’t appear to be hardened criminals; they don’t seem much different from the rest of us. In his book, Occupational Fraud and Abuse-How to Prevent and Detect Asset Misappropriation, Corruption and Fraudulent Statements (Obsidian Publishing, 1997), Joseph T .Wells, CFE, CPA, Chairman of the Association of Certified Fraud Examiners, writes, ” Few people begin their careers with the goal of becoming liars, cheats, and thieves. Yet that turns out to be the destiny of all too many.”

The ACFE’s comprehensive publication How to Prevent Small Business Fraud: A Manual For Business Professionals elaborates further:”When asked why employees commit fraud, most people would say it is because the perpetrators are “greedy” or “con artist” or something of the like. These terms imply that the offenders possess some defect of character that separates them from normal law-abiding citizens. The truth, however, is that even “good ” people commit occupational fraud. Most fraudster are not career criminals. Most employees who embezzle do not take their jobs with the intention of stealing from their company. The biggest hurdle for most people to get over in terms of understanding occupational fraud is to realize that anyone can commit fraud”.

In light of these statements, how can a company best protect itself against employee fraud? The first step is elementary, according to CFE- don’t hire an employee who has stolen previously. It recommends conducting background checks for any potential employee who will have constant access to cash, checks, credit card numbers or any other items that are easily stolen.

Before you hire someone, check as many of the following as possible:-

Past Employment Verification

Even though most employers will only verify position and dates of employment, you can usually tell by their tone of voice what they think of the employee. Ask previous employers whether the applicant is eligible for rehire.

Criminal Conviction Checks

Most Public record services have criminal convictions record for almost every country. You may engage those who are capable of obtaining the record for your consumption.

Drug Screening

Many companies now conduct drug screenings for potential hires as well as current employees. People who are frequent drug users can be more prone to theft or fraud.

Reference Checks

Amazingly, very few employers actually call the references a candidates provides. Most operate under the theory that someone wouldn’t provide a bad reference. However, many times people will list important sounding individuals as references with the hope that you won’t call. and, people often assume, incorrectly that a former supervisor or co-worker will provide a good reference.

Education and Certificate Verification

It is always a good idea to verify a person’s education. Also, if the person claims he has a license or other certification, call the issuing organization to verify it. It is not that unusual for someone to claim a certification or license that has actually been revoked due to a disciplinary action. Most licensing or certification organizations, including ACFE will tell you if any disciplinary action has been taken against a particular member.

Get the Consent of the Candidate

Numerous federal and state laws govern the gathering and use of information for pre-employment purposes. Therefore it is best that you obtain written consent from the candidate before gaining the information listed above. It is also a good idea to obtain a signed authorization and release from a potential candidate. consult with your legal department to ascertain the laws applicable in your company and to obtain proper authorization forms.

References:-

Well, Joseph T.”How to Screen Job Applicants to Avoid Potential Employee Fraud.”American Management Association,March 2003.

Taken from the book titled “Selected Writings” by Joseph T. Wells.