Even before the pandemic, remote work in white collar jobs was on the rise. Now, catalyzed by the ongoing pandemic, it is expected that 36.2 million Americans will be working remote by 2025, according to a Future Workforce Report.
While the benefits of remote work are clear when it comes to mental health, work-life balance, and costs savings, it is also true that when employees are working remotely, it is harder to detect and prevent certain types of fraud. In fact, an unsupervised work environment is ideal for some fraud schemes
Small companies are notably affected by theft in the workplace and embezzlement, as they typically cannot absorb large-scale losses or afford extensive safeguards.
To better understand how to safeguard against workplace theft, let’s start by examining how it takes shape.
Influences for fraudulent behavior
Industry experts have historically explained employee malfeasance in terms of the “Fraud Triangle,” which presents three factors that influence whether a worker will engage in fraudulent behavior:
- Opportunity: Employees are more likely to commit workplace theft or fraud whenever there are fewer interactions with management or supervisors. While remote work becomes more prominent, how can employers ensure workers are not participating in theft or fraudulent activities?
- Pressure: The workforce is experiencing unprecedented stress, particularly among remote employees. Fear of job loss, exacerbated by virus concerns or other hardships, could lead workers into illegal actions within a company.
- Rationalization: Unease over an uncertain future could make workers justify unlawful decision-making. For example, an employee who has had a difficult year may use company funds to purchase personal items.
Remote work creates new fraud risks
When COVD sent everyone home in March 2020, many companies did not have remote access networks in place. With IT teams scrambling to deploy new systems amid the chaos, security flaws developed from misconfigurations, reliance on insecure remote access protocols, and a failure to update software regularly.
According to an FBI report, cybercrime cases have quadrupled since the start of the pandemic. CPA firms, accountants, and professional service businesses are prime targets for thieves, considering the wealth of personal information these entities collect.
In the simplest terms, remote access allows employees to utilize a computer or network from a remote location. For instance, CPA firms can give team members remote access to specialized tax software via a single server. With this convenience comes an unsupervised work environment ideal for various fraud schemes.
Enhanced access to systems and files makes it easier for remote employees to steal company data. Information breaches could also lead to lost funds, legal issues, and even irreparable reputational damage. In smaller companies, remote work also makes monitoring payroll tasks more difficult, while worker compensation is another easily abused area for organizations implementing remote work.
Companies can help mitigate workplace theft risks by:
- Tasking IT staff to manage software updates rather than giving remote employees administrator credentials.
- Issuing company-owned devices to remote workers.
- Requiring staff working remotely to sign a list of telecommuting guidelines.
- Using time-tracking or monitoring software.
- Restricting remote access to payroll records.
- Including home office safety guidelines in remote work policies.
Commercial Crime/Employee Dishonesty Insurance is a crucial defense against theft in the workplace.
What else can employers do to combat ongoing theft and fraud trends? Alongside regularly checking in on staff and offering stress-reducing mental health options, smaller, more vulnerable organizations should consider employee dishonesty liability insurance. Whereas typical office package policies may not cover theft of client funds, Commercial Crime coverage protects employers from financial loss propagated by an employee or group of employees.
According to the Association of Certified Fraud Examiners (ACFE), workplace theft is carried out by employees in 80% of such cases. One in four workers who committed fraud against an employer had been with the company for more than ten years.
Generally, employee dishonesty policy provides:
- Coverage for employee-involved loss of money, securities, and other property.
- Coverage for client property.
- Coverage for employees working “off-premises” at a client’s office.
- Automatic credit card forgery coverage.
- Automatic ERISA bond coverage, eliminating the need for a stand-alone ERISA bond.
- Option to include theft of funds by non-employees.
- Policies for investment professionals, including coverage for acceptance of fraudulent funds.
Employee dishonesty policy extends to partners, directors, members, and trustees. However, accounting or math errors, property seizure or destruction, and governmental action are among the areas this insurance does not cover.
Theft in the workplace will continue to be an issue as the world moves into an increasingly remote future. Organizations can guard against theft and fraud through strategic security practices and implementation of employee dishonesty liability insurance. Learn more about the wide-ranging benefits of employee dishonesty liability insurance here.