Employee theft cost US businesses an average of $1.13 million in losses, according to 2017 Hiscox Embezzlement Study™

Small and mid-sized businesses most likely to be victimized


NEW YORK, NY, Aug. 23, 2017 (GLOBE NEWSWIRE) -- Hiscox, the international specialist insurer, today released the 2017 Hiscox Embezzlement Study™, an examination of employee theft in the US. The findings reveal that US businesses impacted by employee theft lost an average of $1.13 million last year. Small and mid-sized companies (fewer than 500 employees) continue to be disproportionally victimized by employee theft, representing approximately 68 percent of cases.

This is the third annual Hiscox Embezzlement Study, which examines employee theft cases that were active in the US federal court system in 2016.

“There is a necessary level of trust between employees and their employer that is required of successful businesses,” said Doug Karpp, Crime & Fidelity Product Head at Hiscox. “When there is a breach in that trust because an employee or executive steals, it can have a significant impact on the entire organization both financially and emotionally. Business owners and executives need to make the shift from blind trust to intelligent trust to ensure they are able to spot and prevent employee theft.”

The Risk Markers

Although there is no “typical” embezzler, the Hiscox report points to several common characteristics of white collar criminals, including:

  • the median age of a perpetrator is 48 years old;
  • slightly more women than men commit this type of crime (51% vs. 49%, respectively); and
  • finance and accounting are the most common job functions of embezzlers (37%).

Embezzlers do not discriminate when picking their targets – businesses of all sizes and industries may be impacted. Although large companies (500 employees or more) experience fewer instances of embezzlement (24% of cases), they tend to suffer a higher median loss compared to small and mid-sized businesses ($452,025 vs. $289,864). According to the study, financial services continues to account for the highest number of cases of employee theft (18%) of any industry examined. Financial services also takes the lead for the highest total loss across industries, at more than $120 million for the year.

Anatomy of a Scheme

Nearly one-quarter of employee thefts reported involved large-scale losses of over $1 million. High-loss cases often result from schemes that repeatedly divert small sums of money over time, making them extremely difficult to detect. These schemes typically go on for years. In fact, 29 percent of employee theft persisted for more than five years. The average loss for cases that continued for five years or more was $2.2 million, and for cases lasting 10 years or more, the average loss was $5.4 million. 

Funds theft is the most common embezzlement scheme, used in more than one-third of all cases, followed by check fraud (22%). Funds theft is most commonly perpetrated by women (56%) while 70 percent of check fraud cases occurred at companies with fewer than 100 employees.

Warning Signs of an Embezzler

Many business owners blame themselves for allowing theft to happen under their watch, but the warning signs are often subtle. Hiscox has identified five common characteristics to watch for:

  • Intelligent and curious: Embezzlers are often eager to know how everything in the office works. Once they learn the processes, they manipulate them for their own gain.
  • Extravagant: Watch for employees who are living a lifestyle that is out of proportion to their salary.
  • Egotistical risk-taker: An embezzler is often a rule breaker in and out of work life – from speeding tickets to overusing ‘sick time.’
  • Diligent and ambitious: An embezzler may come in early and leave late, and never take vacations. This can appear to be dedication to the company, but in fact it is an effort to keep from being caught.
  • Disgruntled: An employee who feels they are being treated unfairly may be tempted to steal to ‘even the score.’ They may be unable to relax, or may experience severe changes in behavior. 

“Perpetrators of embezzlement typically need three things to get away with a crime - means, motive and opportunity,” said Karpp. “Business owners and executives should aim to understand the warning signs and common schemes of an embezzler in order to identify areas where they can tighten security and implement controls to manage their exposure.”

Hiscox recommends the following best practices for managing employee theft:

  • Prevent embezzlement before it happens by instituting a system of checks and balances. Small businesses, for example, are more likely to give end-to-end responsibility for a money-centric function such as payroll to a single individual, making it easier to steal and cover their tracks.
  • Detect fraud early to keep a small instance from becoming a larger incident; knowing what to look for is critical in spotting an embezzler.
  • Mitigate the impact to your bottom line by insuring your business, pressing charges and letting go of the perpetrator.

Hiscox USA provides a variety of specialty risk solutions including a broad spectrum of professional errors & omissions, general liability, cyber and data security, media liability, management liability, crime, kidnap & ransom, terrorism and commercial property insurance products. 

In the US, Hiscox has offices in New York, NY; Atlanta, GA; Chicago, IL; Dallas, TX; Los Angeles, CA; San Francisco, CA and White Plains, NY.

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Related Materials:
Full 2017 Hiscox Embezzlement Study

About the Report:
All information for the 2017 Hiscox Embezzlement Study was derived from publicly available data regarding nearly 400 US federal court cases in which employee fraud was alleged that either became publicly known or were active in the federal system during 2016. Sources included public announcements from the Department of Justice, company websites and common news aggregators. Organizations included in the report are public and private corporations, limited liability companies, municipal and government agencies, nonprofit organizations and Native American tribal businesses. Companies of all sizes (employees <100, <500, and >500) were included. Additional information on the methodology can be found on page 15 of the 2017 Hiscox Embezzlement Study, found here. Neither this information nor the 2017 Hiscox Embezzlement Study offer legal, business or insurance advice related to the needs of any specific individual business.

About Hiscox
Hiscox is a global specialist insurer, headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). Our ambition is to be a respected specialist insurer with a diverse portfolio by product and geography. We believe that building balance between catastrophe-exposed business and less volatile local specialty business gives us opportunities for profitable growth throughout the insurance cycle. It’s a long-standing strategy which in 2016 helped generate gross premiums written of £2,402.6 million and a record profit before tax of £354.5 million.

The Hiscox Group employs over 2,300 people in 13 countries, and has customers worldwide. Through the retail businesses in the UK, Europe and the US, we offer a range of specialist insurance for professionals and business customers as well as homeowners. Internationally traded, bigger ticket business and reinsurance is underwritten through Hiscox London Market and Hiscox Re and ILS.

Our values define our business, with a focus on people, quality, courage and excellence in execution. We pride ourselves on being true to our word and our award-winning claims service is testament to that. This information is neither intended nor should be construed to be a solicitation for the purchase of insurance by any US person or entity. For further information, visit www.hiscoxgroup.com.

Follow Hiscox USA on Twitter @Hiscox_USA.

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