Business fraud is one of the most expensive liabilities companies and organisations face. In 2021 alone, the ACCC’s report shows that businesses and consumers lost more than $2 billion to scams. People who commit business fraud range from CEOs to executive and junior employees, making it difficult to identify, detect and implement controls. While most individuals who commit fraud in business are typically experienced employees, anyone in a position with opportunity can defraud a business.
In this article, we have listed four of the most common types of people that commit fraud in business. But first, let’s look at the characteristics of individuals who commit business fraud.
Characteristics of people who commit business fraud
People who defraud companies and organisations usually are:
- First-time offenders
- Highly respected and appear trustworthy
- Work in positions with opportunities for fraud, such as upper management, accounting, sales and operations
- Highly experienced and have the right credentials
Some fraudsters may collude with others inside and outside the business to obtain money illegally.
Types of people who commit business fraud
The most common types of people who engage in business fraud include:
1. Business owners
It is common for business owners to commit fraud within the organisation or company for many reasons. For example, they may manipulate financial records to make the company’s worth seem greater than it actually is. They may also paint their losses, liabilities or debt as more minute to attract investors or secure loans.
Tax evasion is another common type of fraud that business owners commit. Since they want to avoid high tax rates, they downplay their earnings or claim false deductions to pay less tax. Some even submit falsified returns to avoid paying taxes altogether.
Junior, senior and executive employees engage in numerous types of fraud, including payroll fraud, asset misappropriation and vendor fraud. Most employees commit asset misappropriation, which involves deliberately stealing money directly from the business (employer). For example, employees working in accounting may falsify timesheets or issue unauthorized bonuses. They may also create false customer accounts to generate false payments, forge receipts or tamper with checks.
People in managerial positions tend to commit business fraud since they are in positions of financial trust. They can easily take advantage of this to obtain money, products or services for their own benefit. For example, it is quite common for managers to use company assets for personal activities and interests. They may use a company vehicle for unauthorised personal activities or a business credit card to shop for personal items.
Most vendors collude with internal employees to defraud the companies and businesses they supply products to. For example, a vendor may bribe an employee to provide them with information about a company’s pricing and budget. They use this information to inflate or manipulate prices to their advantage.
Business fraud is a criminal offence with serious consequences and may result in criminal prosecution.