Corporate Fraud: Definition, Types, and How It Works

corporate fraud

Businesses do not always run smoothly. You should be ready to resolve problems that would come your way. Sadly, issues in businesses are not always caused by inevitable circumstances. There are those caused by people who take advantage just to satisfy their greed. Company fraud can happen to any business, and you should know how to identify and deal with them. But before you call a corporate fraud law firm, read on to know more about this matter.

Corporate Fraud Defined

You would know that your company is suffering from corporate fraud when there are suspicious activities within the organisation. Schemes of corporate fraud can vary depending on the perpetrator’s position in the company, the complexity of the act and the economic impact of the scheme on the business. Some schemes can be easily forgotten while other acts can leave a company bankrupt and its reputation tarnished.

How Does Corporate Fraud Work?

Keeping your business fraud-free is a challenging task. Culprits are difficult to pinpoint unless you have enough documentation of checks and balances within the organisation’s workflow. Creating effective policies is the best way to prevent fraud. When policies are well-thought-out and had gone through extensive deliberation, they can cover the possible system lapses where fraud could take place. Establish a system of checks and balances in all procedures to limit the possibility of fraud.

Types of Corporate Fraud You Need To Know

man examining documentsApart from establishing well-crafted policies and systems of checks and balances for preventive measures, it helps if you know the types of fraud that could take place within your company. Here are some of them:

Identity theft. Identity theft happens when someone uses your company’s name to access confidential business information. Fraudsters get access to financial statements, federal tax identification numbers and bank statements. They may obtain your identity information from physical business documents or unsecured virtual copies.

Payroll fraud. Payroll fraud happens in various ways. This could be when employees ask for payroll advances and fail to pay them back. Another is when employees lie about the hours spent working. Some even ask their co-workers to clock-in on their behalf if they fail to report to work or they come in late.

Money fraud or cash theft. Counterfeiting money is one of the most popular ways to commit fraud in and out of a corporation. When you receive payment, always check the security features of the money. If possible, learn these features and identify them in bills for familiarisation. Some fraudsters don’t even bother coming up with counterfeits. They choose to take the money with them as they leave the company.

These are just some of the most common corporate fraud cases. You can also check on return fraud, worker’s compensation fraud, financial statement fraud, corruption, asset misappropriation and false invoicing. The list will go on, and you need to be on the lookout for employees or companies who don’t mean well. Otherwise, you may see the business you’ve worked hard for years slowly crumble down.

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