Creative employee scammers can go to work running up credit card charges, taking out loans in your customer’s names and committing other identity theft scams.

Editor’s Note: In the August/September issue of FURNITURE WORLD, Jim Blanco exposed common external fraud schemes such as bogus credit cards, negotiable instruments and counterfeit merchandise receipts. In October/November, he looked at internal embezzlement schemes, bogus invoicing scams, merchandising scams and time card schemes. In this issue, the discussion of external fraud will continue with preventive measures retailers can take to avoid loss.

Background Checks

An important part of building a great business is having ethical employees. The days of believing the statement, "My word/hand-shake is my bond" are behind us. When taking on new employees, you really do need to be as thorough as possible. Check on the background of prospective employees. During interviews, ask a few questions about honesty. Give the interviewee an opportunity to tell you a story about how they were honest in the past. You should also actually call their former employer and references. Be sure to go two employers back if you can. You could also run a credit check on the employee to see whether or not they are in a desperate financial situation. If they are, then they might be ripe for an embezzlement scam.

General Office Procedures

Although safeguarding your accounting procedures will prevent many potential types of fraud against your business, there are other office procedures that business owners and managers should follow to further protect their companies from fraudulent activities. Perhaps you have very honest bookkeepers but there may be a wild card somewhere else in your midst.

A new restaurant owner learned about the importance of securing his office the hard way. The city council had encouraged this restaurant owner to hire local people, and he had complied. After the first month of business, he noticed that many checks were missing from his business checkbook. The owner had left the business checkbook out, and one of the employees had removed several checks from the back of the checkbook so that it would take time for the owner to notice they were missing. The employee then enlisted the help of her partners in crime, filling out and passing these forged checks to local banks, merchants and check cashing stores. Since it took awhile for the owner to notice that checks were missing, he did not at first suspect that anything was wrong. Also, since bank statements with which to reconcile a checkbook ledger are issued only once a month, these forgers had at least a month’s head start. A month’s time can leave a cold trail for investigators to follow.

Secure Your Private Office

Company owners, managers, and accounting staff should take care to secure their offices when leaving to attend a meeting, go to lunch, or go home for the evening. Remove important documents from the top of your desk and counters, and secure them in locking file cabinets. Lock up your desk, your office windows, and your doors as well. Restrict the number of sets of keys to your office, and consider well who should be given sets of keys. Make sure that others in the company that deal with important information and financial instruments are also instructed to do likewise.

Protect Customers’ Personal Information

While we are on this topic, you should also give thought to protecting your customers’ personal information against being looted by your employees. Any checks, credit card receipts, social security numbers and other information used on loan applications can be gleaned by employees if they have easy access to this information. Armed with such information, creative employee scammers can go to work running up credit card charges, taking out loans in your good customer’s names and committing many other identity theft scams and other frauds. If the word ever went out to the public that your customers were being victimized by your own employees, it would be terrible publicity for your business.

Handle Mail With Caution

This prescription had meaning for retailers even before September 11. Don’t put your outgoing mail in a common location where...

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