Most good business leaders don't hold back when it comes to protecting their companies from outside threats like hackers. But what if the threat is on the inside, with your own employees stealing money from you?

The problem happens distressingly often. In fact, a survey of more than 1,200 individuals by Chrome River Technologies, Inc. found that one quarter of respondents have been caught committing expense fraud. This unsavory behavior puts the ability to complete basic operations and innovate at risk, so you need to weed it out as soon as possible.

The thieves among us

The Chrome River survey found that men are much more likely to dip into your finances than women are. The survey found that, compared to females, males are

  • Nearly twice as likely to commit expense fraud
  • More than four times more likely to pad an expense report by $1,000
  • 60.5 percent higher than females to pad expense reports by $100-$499
  • 62.2 percent more likely to believe they wouldn't get caught falsifying expenses
  • Receiving formal expense fraud warnings at a rate 31.6 percent higher than females

Gender aside, Chrome River's survey also found that expense fraud is more common with mid-level workers (58.1 percent). Younger workers (those under the age of 44) also steal the most, accounting for 82.9 percent of expense fraud cases.

What drives the stealing

Now, does this mean women are less greedy or more honest than men? Not necessarily. But it does suggest that there are cultural and systemic norms in place that allow them to steal from companies more often and get caught at relatively low rates. Men traditionally have held authority in businesses, for example, and that might lead some males to feel both entitled and protected.

Anne Becknell, SVP, Strategic Solutions for Chrome River, says part of what leads men to have a higher incidence and dollar value of fraud is that their appetite for risk is higher compared to women. They have more confidence in their ability to buck the system and are more likely to up the stakes if stealing lesser amounts is a success.

But unfortunately, some of the behavior might be directly learned, with collusion happening plenty, too.

"[Men] generally justify their actions by placing blame on the company," Becknell says. "[They make] statements like 'if the company decided to lay off 100 employees so they could make their bottom line, they wouldn't lose any sleep over the families affected'. [...] And a 'fan favorite' is that they were taught by their managers how to 'game the system' and have continued to carry on when they think this is an acceptable tradition." 

Lower-level workers might avoid stealing because they don't want to risk crumbling the job and career foundation they need to build. They likely assume that employers will be looking to verify not only skills, but also integrity in the first few months or years of employment. Mid-level workers, by contrast, might risk the theft once they feel they've earned the company's trust, and because they might feel unfairly compensated given the work they've done and what their executive bosses have. In this sense, you could see the theft as a passive-aggressive attempt to cope with envy and assert authority and dominance. Younger workers similarly might try to assert themselves, given they are facing a tighter job market and harsher economic conditions than previous generations have.

Keeping unauthorized hands off your money

Becknell says that there's reluctance within companies to talk about and admit expense fraud failings. And while penalties can be harsh (e.g, termination, required public disclosures or even prison), many companies do only the minimum. According to the survey, for example, of those caught for expense fraud, over 75 percent said a warning was the most serious consequence they got. But Becknell points out some key proactive steps you can take to prevent expense fraud cases and reduce the need for disciplinary action.

1. Set a clear and fair expense policy that, while not strict to the point of employee resentment, is free of vagueness. The policy should show sensitivity to employees who travel regularly.

2. Give employees great tools. The sad reality, Becknell asserts, is that most managers simply rubber stamp reports they get, seeing reviews as too arduous. But with modern expense systems, you often can find ways to enforce your policies automatically, which keeps fraud cases from slipping past auditors, reduces personal workload and saves time. Look for tools that make the general expense submission process easy, yet make it difficult to submit over-inflated or fraudulent claims.

3. Audit selectively. Automated tools can identify individual transactions with a higher potential for fraud. In general, audit the first 10 reports of all new hires to check understanding of and compliance with policy. Then audit every tenth report submitted. Since fees sometimes have to be paid in advance, be prepared to look backwards at your reports, too. This way, you can correlate expense receipts with the dates of specific events (e.g, seminars, trade shows) you can verify took place.

4. Bring in HR. Because expense fraud can stem from learned behavior, when managers find fraud among their employees, HR should provide counseling to those managers. The counseling can remind all parties of potential penalties, which often deters most future fraud. It also can hold the managers accountable for reviewing reports and help managers recognize the role they might have played in the situation. Lastly, HR can ensure that officials give the other reports from those managers a closer look.

Through every step, transparency in communications with employees is a must.

"One of the big things to remember," Becknell concludes, "is that most people are inherently honest, and any fraud that they commit is because a) it's easy to do, and b) because they don't think they'll get caught. If you can remove these two elements, the rate will fall dramatically."