$45 Million Employee Fraud - How To Prevent It Happening To You.

A trusted financial accountant recently pleaded guilty to defrauding her employer, ING, of $45 million over five years. The funds were used to purchase luxury homes and jewellery, hidden in plain sight. While this case made headlines due to its size and the high-profile company involved, employee fraud is far from limited to large corporations.

In fact, small and medium-sized businesses are more vulnerable because they often lack robust systems and internal checks. And the consequences, loss of profitability, cash flow issues, reputational damage, and staff demoralisation, can be devastating.

Employee Fraud is More Common Than You Think

Surveys show that around 50% of companies experience significant employee fraud each year. These aren’t always million-dollar schemes—sometimes it’s a slow leak of a few thousand dollars a month that goes unnoticed until it’s too late. The most common types of fraud include:

• Theft of money (cash, EFT, cheques, or bank transfers)

• Theft of physical assets (products, inventory, raw materials)

• Corruption (e.g. accepting bribes or favouring suppliers)

• Financial statement manipulation

Why Financial Fraud is So Difficult to Detect

Stealing money is particularly attractive to fraudsters because it's less visible than stealing goods, and doesn’t need to be physically moved. A single fake invoice to a sham supplier is much easier to conceal than walking out with a box of electronics. The fraudster simply “closes the loop” by approving their own false transactions.

One common scheme involves an employee with payment authority setting up a shell company, issuing invoices for non-existent services, and approving the payments themselves. Because services can be hard to verify, the fraud often goes undetected for years.

Five Controls Every Business Should Implement

To reduce fraud risk, businesses must design their systems to make fraud as difficult as possible to commit and conceal. Here’s how:

1. Proper Authorisation of Transactions

No one should be able to authorise payments or financial advantages without oversight. This includes:

• Altering credit limits

• Approving overtime

• Writing off debts

• Signing cheques or approving online banking payments

For sensitive transactions, require two independent authorisers—especially for electronic banking, where dual authorisation is often overlooked.

2. Segregation of Duties

Never let a single person control an entire process. For example, if someone receives customer payments, enters them into the system, and can also write off bad debts, they can easily misappropriate funds and cover their tracks. Spread responsibilities across multiple roles.

3. Strong Recordkeeping and Reconciliation

Use well-designed forms, number sequences, and documented processes. Key reconciliations—such as between deposit slips, bank statements and cash receipts—should be reviewed by someone not directly involved in the transaction flow.

4. Restricted Access to Financial Systems and Assets

Limit access to:

• Blank cheques

• Cash

• Financial software

• Payroll records

Ensure computer access is password-protected, and that users only have access rights appropriate to their role.

5. Ongoing Supervision and Independent Checks

Senior managers must regularly review reports and ask questions. Areas to review include:

• Large or frequent credit notes

• Unusual journal entries

• Trends in overtime, bonuses, and payroll

• Write-offs and adjustments

Fraudsters often rely on complacency and predictable behaviour. Periodic reviews help disrupt this pattern.

When to Call in an Expert

Many companies don’t have the internal resources to run effective fraud risk assessments. External forensic accountants or risk consultants bring a fresh, independent eye and can highlight weaknesses you might overlook. They can conduct a comprehensive fraud control review and recommend practical improvements.

Final Thoughts

Employee fraud can happen in any business—large or small. No one likes to think their staff would steal from them, but systems should be built on trust and verification. By implementing smart controls and staying alert, you can protect your business from becoming another headline.

Need a Fraud Control Review? Dolman Bateman has been helping Australian businesses protect their assets and detect fraud for over 30 years. If you'd like help reviewing your internal systems or suspect something isn't quite right, get in touch with us.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.