Embezzlement and the Hiring Process

March 2018 | Article

When you read embezzlement stories, you might wonder how embezzlers thought they could get away with their scheme. And then, there are stories like the following, where a convicted embezzler obtains a position of trust again to defraud another organization. Organizations should make sure they have the proper controls in place to protect assets.

Scheme Type: Embezzlement (defined as misuse or misapplication an of organization’s assets entrusted to an individual). 

Loss Amount: $46,000

Duration: 1 year

Red Flags: Previous embezzlement conviction

Industry: Nonprofit

Perpetrator’s Position: Office Employee

Scheme Synopsis:

A church hired an individual who was serving a sentence of probation on a conviction of embezzlement from her previous employer who she was to pay $38,784 in restitution. The individual began embezzling immediately upon being hired by the church as an office employee. In a little over a year, she embezzled $46,000. When asked why she embezzled from the church, she said, “I paid bills and my mother was sick, so I was living with her and helping her out. I had a lot of medical bills.”

Her mother worked at the church as well and her grandfather was a pastor there at one time. Upon this individual’s mother’s death, the church discovered theft of money. During the time period of the embezzlement from the church, the individual was making restitution payments to her previous employer.

There are a few pieces of the puzzle we don’t know with this particular matter, such as if the church performed a background check, or did they hire her with the belief that she had changed. Religious organizations can be an easy target for embezzlers.

Whether it’s a religious organization, another nonprofit or a for-profit organization, it shouldn’t be forbidden to hire people with prior embezzlement histories. But organizations should make sure they have the proper controls in place to prevent people entrusted with the organization’s assets from becoming dishonest.

The following are recommendations for vetting potential candidates during the pre-employment hiring process to avoid becoming the next victim of embezzlement:

  • Verify education and professional credentials for misrepresentations.
  • Perform background checks consisting of criminal and credit checks (if the individual will be entrusted with the organization’s assets) to identify past criminal history and potential financial pressures.
  • Vet background for wage garnishments, liens and/or judgments that may be signs of prior embezzlement history.
  • Research for news articles online that may shed light on prior employment activities.

Although these recommendations are essential in mitigating embezzlement risks, your organization should follow its hiring policy. If your hiring policy hasn’t been updated in several years, consider working with an employment attorney to review and update your policy manual to today’s standards.

The hiring process is an important step in fraud prevention because fraud doesn’t happen if people aren’t involved. The next step in preventing fraud is to ensure your organization has the proper checks and balances over its cash receipts, cash disbursements, payroll and all other assets. Your organization’s internal controls are only as good as its weakest link, so be sure to review and monitor your internal controls on a periodic basis.

Read more about this twice-over embezzler.

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