Are Your Customers Protected from Embezzlement?
June 24, 2015
Embezzlement—the word conjures images of executives concocting elaborate schemes to fleece huge corporations of millions of dollars, which is then spent to support the perpetrators’ extravagant lifestyles with private jets and exotic vacations. But the truth is far less glamorous—and far more common—than Hollywood would have you believe.
If your customers are small businesses, they may think they don’t need to be concerned about embezzlement. The fact is, four out of five embezzlement schemes in 2014 were carried out in organizations with fewer than 100 employees, and over 50% were from organizations with fewer than 25 employees.
Small businesses are particularly vulnerable because they often employ only one person who has responsibility for the accounting or accounts payable function from end to end, making theft more difficult to detect.
The median loss from an embezzlement scheme is $280,000. That’s roughly equal to the average annual profit margin for an organization of this size. Think about that: the average embezzlement scheme will wipe out a company’s profits for an entire year.
This data comes from the 2015 Hiscox Embezzlement Watchlist: A Snapshot of Employee Theft in the US, which is an analysis of all US federal cases related to employee theft in 2014 in for organizations with fewer than 500 employees. Hiscox published this report in order to shine the spotlight onhighlight the problem of employee theft, and to help small and mid-sized businesses understand how to prevent theft and reduce its impact to the organization.
The Embezzlement Watchlist provides a profile of the typical embezzler, who is female, 50 years old, and has had a long tenure with the company from which she steals. Most thefts occurred in companies in the financial services sector, but no sector is immune. Employee theft takes many forms, including outright theft of funds, check and vendor fraud, and payroll fraud.
Most business and property insurance policies do not cover losses from employee theft, so chances are that your customers are not protected from this very real threat. A strong crime policy, including coverage for employees known to have prior incidents of theft or dishonesty, coverage for theft from the organization and its clients, and coverage for theft by vendors, is critical to make sure your clients are fully protected.
Read the complete 2015 Hiscox Embezzlement Watchlist here.