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Skint January = Workplace Fraud

Skint January Workplace Fraud

Skint January = Workplace Fraud

There’s a well-known saying that poverty breeds crime. Most of us who are fortunate to have regular employment could not, in all conscience, classify ourselves as poor, so why do many resort to criminal activities?

I think it has a lot to do with certain times when we feel under more financial pressure than others.

January is one such time.

After the excesses of the festive season, January is often a financially tight month for many people. Buying gifts, spending more than usual on luxury food items, and going away on holiday all contribute to bank accounts that are significantly emptier than at most other times of the year.

Coupled with this is that most companies pay their staff earlier in December to allow for last-minute seasonal spending. This makes the gap between paydays at least a week longer than normal.

Then there are the typical New Year expenses to factor into the equation – new school uniforms and school fees being two of the biggest. Many companies also introduce price increases in January, so it’s often a month when our medical aid, electricity and other regular expenses go up.

All of this combines to create a highly stressful time financially.

Some people are able to budget for this during the year, saving a little extra each month so that when Janu-scary comes around, they have savings to cover the additional expenses. For others, finding even a couple of hundred Rand extra every month to save is difficult at best.

Research shows that as many as one in three people admit to feeling pressure to spend more than they could afford on year-end festivities – and when the bills for that spending start arriving early in the new year, stress and worry start to mount.

The situation is particularly noticeable in lower- and middle-income households, and it is here that we find many otherwise honest people looking for less-than-honest ways to supplement their income.

The Fraud Triangle

The Fraud Triangle is a framework auditors often use to explain the most common reasons why “good people go bad.” The three elements of the Triangle are those most likely to be present at the time a usually honest person commits fraud:

  1. Motivation (financial pressure)
  2. Opportunity
  3. Rationalisation


Let’s examine these in a little more detail:

Financial pressure

This is the primary driver behind most of the fraud committed by “ordinary” people. It is usually seen as a last resort after the person concerned has failed to solve their financial problems legally.


Fortuitously for the person concerned, the solution to their problems is found in their workplace. This is usually because of a weakness or other vulnerability in the company’s internal controls.


Hardened criminals have no real interest in justifying their actions. “Ordinary” people, on the other hand, often feel the need to lessen their guilt by finding what they feel is a just cause for their behaviour – usually painting themselves as the victim. “I have to do it for my family – I risk losing everything if I don’t.”

A Slippery Slope

If you’re like most people, you probably feel a little sympathy for anyone who feels so desperate they’re willing to go against lifelong behavioural ethics.

But here’s the problem with that line of thinking:

It’s the thin end of the wedge.

Getting away with a financially beneficial crime can be addictive. What started as a once-off dalliance can quickly become a bigger and bigger scheme that can go on for years.

It raises the question that philosophers have been debating for millennia: Are most of us people with an essentially good nature that’s corrupted by society, or do we have a basically bad nature that’s kept in check by society?

Either way, I’ve seen first-hand how easy it is for a good person to do a bad thing when the circumstances allow.

So, as a manager or business owner, what are some of the more common types of workplace fraud that occur this time of year, and what warning signs should you be looking for?

Common Types of Seasonal Workplace Fraud

Expense account manipulation

This is when an employee uses a company expense account for personal expenses but submits them as business-related. This type of fraud also includes forging receipts, double claiming for expenses, submitting false reimbursement claims and inflating expense claims.

Theft of company resources

This is not just the odd pen or notepad. By company resources, I mean things like stealing high-value products, such as luxury clothing, accessories, or electronics for resale, and then altering inventory logs or sales records to cover up the loss. It could also include crimes such as diverting business funds or payments before they’re recorded in the company’s books, or even creating “ghost employees” – setting up payroll for fake employees and diverting their “salaries” to bank accounts controlled by the fraudster.

Falsifying records

It’s not difficult for an hourly-paid employee to inflate the number of hours they’ve worked in a given week. Or for a salesperson to alter the number of sales they’ve made to improve their commission or receive a bonus.

Red flags to watch out for

The end of the year is always busy, so it’s easy for managers to be less than vigilant when it comes to picking up signs of fraudulent activity. This becomes even trickier when the culprit is usually an honest employee whom you have never previously had reason to mistrust.

But it pays to be careful, so here are some warning signs to watch out for:

Sudden changes in behaviour

Any employee who seems uncharacteristically quiet or secretive is worth watching. Be aware of anyone being unusually possessive about overseeing financial documents, for example. Or someone who refuses to take leave (they’re concerned that any illicit activity will be picked up by the person taking over the work duties).

Unusual or unnecessary purchases

Anyone with a little accounting knowledge can make corrupt payments appear legit. Watch out for frequent, low-cost orders or large quantities of items for which you can see no obvious use. Also, be on the alert for items ordered and paid for at prices that seem unusually high.

Discrepancies in accounting records

Not to be confused with a genuine accounting error, a fraudulent discrepancy is an intentional act to hide or alter entries for the benefit of the fraudster.

What can you do?

Knowing the warning signs of fraud is all very well, but preventing fraud in the first place is first prize. Here are some pointers:

Create an anti-fraud culture

Stats tell us almost one-third of fraud occurs because of a lack of internal controls. Ensure you have confidential, clearly defined reporting routes. Respond quickly to reported fraud to prevent further losses and minimise the impact.

It’s also critical to provide regular anti-fraud training for all employees, and custom training for high-risk areas such as finance, procurement and HR/recruitment.

Review everything

Never allow employees to check and approve their work. Check company credit card statements for personal expenditures. Ask for original receipts for employee reimbursements and always pay close attention to bank statements.

Don’t pretend you’re not watching

Employees are far less likely to commit fraud if they’re worried they’ll be caught. Be as present as possible and make sure you’re aware of what is going on. Also, let your employees know your door is always open if they want to chat about a personal problem, such as financial difficulties. They need to know committing a crime is not the only option.

Remember, worrying about workplace fraud does not make you the Grinch Who Stole Christmas. If you don’t fight back when incidents are still clustered around the holidays, you could find yourself with a much bigger problem further down the line.