Every day, there is a case of fraud being reported or heard in court. While the public has expressed outrage over fraud and corruption in the public sector, the private sector has not been spared either. From large corporations to small and medium enterprises, businesses across the country are facing challenges such as theft, fraudulent invoices, mis-invoicing, under-receipting, and the manipulation of business systems and procedures for private or personal gain. Many individuals call themselves “corporate hustlers,” but in reality, they are simply fraudsters disguising themselves as street-wise professionals.

Fraudsters can wreak havoc in an organization, leading to financial losses, reputational damage, and decreased employee morale. Detecting fraud early is crucial, and Human Resources (HR) officers play a pivotal role in this process. Since HR officers are responsible for hiring and firing, they have access to personal information of both prospective and current employees. By requesting criminal record checks, asking relevant personal questions during pre-employment interviews, conducting periodic assessments, monitoring behavioral patterns, evaluating financial status, tracking asset growth, performing lifestyle audits, and using psychological evaluations, HR officers can effectively identify potential fraudsters. This proactive approach is often more effective than reactive investigative measures. Here is how it works:

Regular interviews with employees provide an opportunity to assess their current mindset, job satisfaction, and any noticeable behavioral changes. During these interviews, HR officers can ask open-ended questions to encourage employees to share concerns and observations. Sudden shifts in an employee’s attitude, reluctance to discuss certain topics, or inconsistencies in their responses can serve as red flags for potential fraudulent behavior.

Behavioral patterns can reveal a lot about an employee’s intentions and actions. HR officers should look out for:

Unusual Working Hours: Employees who consistently stay late or arrive early without a clear reason should raise concern. While some may associate this with hard work, it can also be a tactic to cover tracks or destroy evidence that could incriminate a fraudster. Exceptional cases may include month-end reporting or bookkeeping, but it would be unusual for a receptionist to stay late every day.

Excessive Control & Isolation: Employees who avoid team activities or prefer working alone may be hiding something. Those who insist, “Let me do it faster, don’t worry,” could be attempting to bypass checks that might expose fraudulent activity. Handling tasks alone and refusing to delegate can be a strong sign of suspicious behavior.

Reluctance to Take Leave: Employees who never take time off may fear that their absence will expose their fraudulent activities. Taking leave means someone else will have access to their work, potentially scrutinizing and uncovering irregularities. This is especially common in roles that involve approvals and authorizations, such as petty cash handling or processing claim forms in insurance.

An employee’s financial status and growth in assets can provide clues to potential fraud. Sudden and unexplained increase in wealth, such as luxury purchases or significant investments, may indicate involvement in fraudulent activities. HR officers can gather this information through:

Self-Disclosure: Encouraging employees to report any significant changes in their financial situation can help identify potential risks.

Public Records: Reviewing publicly available financial and asset records can provide insights into an employee’s financial standing. While this may be considered surveillance and could face backlash, employees often share such information on social media platforms like Facebook, TikTok, and Instagram. In such cases, HR can reasonably inquire about these postings. To ensure legality, companies can include clauses in employment contracts for high-fraud-risk positions, allowing such reviews:

Observation: Noting changes in an employee’s lifestyle, such as acquiring new cars, taking expensive vacations, or wearing high-end clothing.

Children’s Schooling & Expense Analysis: Reviewing company expense claims and comparing them with the employee’s known income.

Psychological evaluations can help identify personality traits associated with fraudulent behavior, such as a lack of integrity, high-risk tolerance, or a tendency toward deceit. HR officers can use:

1. Personality Tests: Administering assessments to evaluate traits such as honesty, dependability, and risk aversion.
2. Stress Interviews: Conducting interviews designed to assess how employees handle pressure and ethical dilemmas.

Why This Approach Is More Effective Than Reactive Measures

Proactive Detection: Regular monitoring and evaluations enable the early detection of potential fraud, preventing significant damage. Combining various methods provides a holistic view of an employee’s behavior and intentions, making it more difficult for fraudsters to conceal their actions.

Enhanced Trust: A proactive approach demonstrates a commitment to ethical behavior, fostering a culture of trust and integrity within the organization.

Conclusion

Identifying fraudsters within an organization requires a proactive, multifaceted approach that leverages the skills and insights of HR officers. By conducting periodic interviews, monitoring behavioral patterns, assessing financial status and asset growth, performing lifestyle audits, and using psychological evaluations, HR officers can effectively detect and prevent fraudulent activities. This approach is often more effective than reactive investigative measures, as it allows for early detection and reinforces a culture of integrity and transparency.