Employee Fraud at Businesses

A Rogue Employee Might be On Your Payroll, Too

So writes Sarah E. Needleman at the Wall Street Journal Law Blog, where she points out that small businesses tend to be more vulnerable to fraud than large firms:

If a business as established and well off as UBS can suffer at the hands of one bad apple, could the same can be true for any business, even a small firm?

According to various media reports, an alleged trading scheme at the Swiss investment bank went undetected for three years before it was finally discovered last week that a 31-year-old trader was apparently to blame. The trader, Kweku Adoboli, has since been arrested by U.K. authorities and charged with triggering a $2 billion loss.

Last year, I wrote a Small-Business Boss column on how many small-business owners inherently treat their employees like family and therefore do without strict internal controls, security cameras or other defensive tactics. For this reason, they actually tend to be even more vulnerable to employee fraud than large firms.

In the story, I noted employee frauds at businesses with fewer than 100 employees cause a median loss of $200,000 — $57,000 more than the median losses that larger organizations suffer, according to the Association of Certified Fraud Examiners estimates. James D. Ratley, president of the Austin trade group, says those figures stand firm today.

UBS trader Kweku Adoboli leaves court on Friday in London.