When people hear “fraud detection,” their minds often go straight to forensic spreadsheets, software alerts, and suspicious transactions. But fraud rarely begins in the general ledger, it starts with people.
That was the heart of my recent presentation, Somebody’s Watching Me at Scaling New Heights, where I walked through real-world examples of fraud I’ve uncovered and the strategies that would’ve caught it sooner. The session wasn’t just about internal controls, it was about context, relationships, behavior, and the all-too-human reasons people make unethical choices.
Fraud rarely looks like an obvious crime. Often, it looks like loyalty. Like someone who works overtime without complaint. Like a vendor who’s “always been good to us.” Like a bookkeeper who’s “part of the family.”
That’s why I stress the importance of looking at red flags through a behavioral and relational lens.
I once investigated a team member who was giving away free products in exchange for event tickets and favors. He called it “advertising.” But it was a drain on the business, done without authorization.
This wasn’t just a one-off scenario. Often, employees develop informal relationships romantic, friendly, or familial that compromise oversight. I encourage all firms to ask:
Camaraderie is wonderful for culture but terrible for controls if left unchecked.
One of the biggest red flags I see is the person who never takes a vacation and insists on handling everything, especially mail and bank deposits. In a criminal law firm I worked with, that behavior masked a significant fraud scheme involving cash retainers. The employee would provide a full receipt to clients but enter only a partial amount into the books, pocketing the rest.
That business had a bookkeeper, a quarterly reviewer, and a partner reviewing taxes. But the quarterly reviewer had stopped verifying records and was instead heading out for daiquiris with the bookkeeper. The company paid $80,000 a year for these services.
The fraud triangle, pressure, opportunity, and rationalization shows up in nearly every case. Employees going through divorce, addiction, medical crises, or financial strain often make choices they wouldn’t otherwise consider. I tell clients to watch for behavioral shifts and new stressors.
Even seemingly minor cases can escalate. Think about the movie Don’t Tell Mom the Babysitter’s Dead. It starts with “borrowing” money from petty cash and snowballs into a full-on deception. Real life isn’t so different.
Controls are not about distrusting your team. They’re about protecting trust. Fraud often comes from those we think we know best.
At one company, I approved giving drivers cash for gas after the fleet card was frozen. We gave $100 to fill up trucks but receipts came back for the full amount while only $20 worth of fuel was actually pumped. The gas station attendant tipped me off.
Even when the fleet cards were reinstated, the fraud continued. Drivers would show up before work hours, use the card to pump gas into someone else’s car, and pocket the cash.
When I finally tallied the theft, it reached felony levels. The driver was arrested at work just as a bag of weed fell out of his pocket.
Lesson? Require original receipts, not just amounts. And always review time stamps and transaction details.
Some companies hold employees accountable for missing receipts by booking expenses as employee receivables. But without enforcement, those receivables can swell into six figures. One client had over $100,000 in unresolved employee charges, rendering their P&L worthless.
Employees will often use familiar vendors or mimic them to hide personal expenses. One staffer submitted auto repair bills for her personal vehicle, burying them in a stack of company fleet maintenance charges. Another quietly paid off a personal Amex card by mimicking the company’s payment pattern.
Utilities were another method. When someone routed their home electric bill through the company, the $200 increase was lost in the noise of a multi-thousand-dollar invoice. “Inflation,” they said. In reality, it was theft.
When fraud is discovered, don’t rush to fire the person immediately. Instead:
Ask: Are system credentials tied to personal email addresses? If so, shift to company-owned accounts. Lock that down before there’s a problem.
If something looks off, don’t accuse. Instead, use open-ended, collaborative language:
As fraud professionals or advisors, our job isn’t to be best friends with the internal team, it’s to protect the client. But relationship-building is still a critical part of the work. You need access and cooperation, and that often starts with empathy.
This is a question I always ask in my sessions. The room often splits between yes and no. Then I tell the story of the woman who stole toilet paper from her job because she couldn’t afford to buy it. That woman was my mother.
She was underpaid, despite outperforming male colleagues. She didn’t consider herself dishonest just desperate. She wasn’t alone. Everyone at that company took supplies. Even the controller was later discovered to be an embezzler.
I don’t condone what she did, but I understand it. That’s the human side of fraud.
Yes, you need controls. Yes, you need oversight. But above all, you need awareness of your people, their pressures, and their motivations. Fraud doesn’t happen in a vacuum. It happens in a culture, within relationships, and often in plain sight.
As you support your clients or your own firm, ask not just “What happened?” but “Why did it happen?” The answer might change how you prevent it next time.
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