Byte of Prevention Blog

by Camille Stell |

Profile of a Fraudster

Computer frausterIf you want to see some staggering statistics, look no further than the Association of Certified Fraud Examiners.

Percentage of annual revenues lost to theft or fraud – 5%

Median amount of loss - $145,000

Median period of time fraud occurred before being caught – 18 months

Percentage of employees who have stolen at least once from their employer – 75%

Percentage of employees who have stolen at least twice from their employer – 37.5%

Unfortunately, law offices are not immune to employee theft. It seems worthwhile to share the fraudster profile with you. Consider these red flags that could apply to lawyers or staff who are taking money from the firm:

Personal

  • Undergoing known financial difficulties
  • Divorce or other major life changing events
  • Unexpected change in behavior
  • Instability in their life circumstances
  • Past employment related problems
  • Past legal problems
  • Living beyond their means or an excessive lifestyle
  • Desire for personal financial gain
  • Excessive family or peer pressure for success

Professional

  • Unusually close relationship with vendors or clients
  • Serves as primary contact with law firm bank and payroll vendor
  • Often makes tasks more difficult than necessary perhaps to obfuscate or reduce transparency
  • Overly protective about their workspace
  • Prefers to work unsupervised, after regular work hours or frequently takes work home
  • Complains about lack of authority or a micro-managing work environment
  • Complains about inadequate pay
  • Complains about excessive work pressure and stress
  • Reluctance to take vacations or extended time away from the office

Personality Traits

  • Control issues manifested in such ways as an unwillingness to share duties or asking fellow employees not to go through their mail or work product while they are out of the office
  • Excessive secrecy or trust issues
  • Irritability, suspiciousness or defensiveness
  • Confrontational when challenged
  • Tells lies, even about unimportant items
  • Unreliable
  • Cuts corners or bends the rules
  • Tends to shift blame and offer excuses

Law firms often fail to see the red flags. Lawyers sometimes delegate tasks that are associated with finances, billing, receivables, ordering supplies and maintaining bank and payroll company relationships. As a result, there are missed opportunities to detect or prevent fraud. Also, as employers fail to respond to red flags, the fraudster often feels more emboldened to continue the fraud and often in increasing measures. First, the target is the petty cash fund, then payroll or the trust account.

Steps to Prevent Employee Fraud

  • Create a positive work environment that encourages employees to follow established policies and procedures
  • Implement internal controls and proper checks and balances
  • Screen potential employees carefully – use pre-employment background checks, use a respected recruiting firm, check references
  • Educate your employees on trust account guidelines
  • Reconcile firm accounts regularly
  • Have the firm’s financial statements sent directly to managing attorney
  • Perform random audits
  • Rotate job duties
  • Require dual signatures on checks
  • Do not allow signature stamps to be used
  • Implement mandatory vacation policy
  • Offer to assist employees who are experiencing stress or difficult times (programs may be offered through your insurance program such as Employee Assistance Programs or wellness programs)
  • Obtain employee dishonesty insurance coverage (Adam Pierce at Lawyers Insurance Agency can assist)
  • Trust your instincts

Recognizing red flags and being willing to act on them could save your law firm money and even more importantly, your law license.

Camille Stell is the Vice President of Client Services for Lawyers Mutual. Camille has more than 20 years of experience in the legal field. Contact Camille at camille@lawyersmutualnc.com or 800.662.8843.

About the Author

Camille Stell

Camille Stell is the Vice President of Client Services for Lawyers Mutual. In 2011, Camille was recognized by North Carolina Lawyers Weekly as a member of the inaugural class of “Leaders in the Law.” In 2016, Camille was recognized by the Triangle Business Journal as a “Women in Business” award winner. Continue this conversation by contacting Camille at camille@lawyersmutualnc.com or 800.662.8843.

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