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Fraud Tip: Implement Employee Controls

Share current LOB: SmallBusiness

Employee theft — occupational fraud — costs employers billions of dollars annually and is 10 times more likely to occur than Internet crime.(1) Fortunately, there are simple controls you can implement to protect your business. These controls also protect employees from the suspicion of fraud, creating a more professional work atmosphere.

Consider the following five employee controls for your business:

1. Access Controls

Using passwords and entitlements to control employee access to sensitive financial information is a simple way to reduce your risk for occupational fraud.

2. Enforced Division of Labor

Separating financial duties is a powerful way to reduce risks. Find ways to separate the control of assets — banking — from the recording of assets — bookkeeping and reconciliations — from the disposition of assets — purchase and check-writing authority. You also can create tiered access and entitlements within your online banking account.

3. Anonymous Reporting


Receiving internal tips is the most common way small business owners discover fraud. Make it easy for your employees to report fraud to you through anonymous hotlines or other methods.(1)

4. Employee Screening


Fraud research finds that only seven percent of fraud perpetrators have been previously convicted of a fraud-related offense1.  Basic employee screening, such as pre-employment background checks, may have some effect in preventing fraud and theft, but the effect is probably limited.

5. Fraud Education and Policies

Small businesses that educate their employees about the threats of internal and external fraud experience half the losses compared to those who do not. The Association of Certified Fraud Examiners (ACFE) has resources to help you educate your employees about these threats.

For example, having a clearly stated policy indicating you will be watching, auditing, investigating and reporting fraud and crime will set the right example for employees. According to the ACFE, less than 20 percent of businesses with fewer than 100 employees have fraud education and training.



1 The Association of Certified Fraud Professionals 2010 Report to the Nations on Occupational Fraud and Abuse

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