How Fraud Can Rear Its Ugly Head in Places Where You Might Not Suspect

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As an HR consultant I must be ever vigilant in my pursuit of potential liabilities inherent in small business environments.   Below are some popular challenges that I witness on a frequent basis.

Employment Application:  Whether you are a professional IT firm or a mom and pop corner store, if you are hiring you should be using an Employment Application.  This is your first line of defense in determining if you are bringing the right element of personnel into your business.  Use this form to your advantage.  Ensure that you use an application that is appropriate for your business and follow through with due diligence when researching the qualifications of your potential hire.  Contact the references, verify the education and look for inconsistencies.  Your hiring practices will profoundly affect your working environment.

Personnel Folders and Form I-9’s: It is important in small business environments to keep personal information in its proper place.  Small businesses often do not have a locked office or a place where an owner can store personnel files behind a locked door.  MA law requires that all personal information is protected.  That means that your personnel files must be in a filing cabinet that is preferably fire rated, locked and protected against theft.  Form I-9’s are to be separate from personnel records and locked up as well.  The potential liability of housing this information in an open environment could be catastrophic, not only can employees access other employee’s information but you run the risk of exposing personal information to the public.  Remember if a breech in security occurs you are required to report that to the Office of the Attorney General.  Ensure you’re protected and have implemented a Written Information Security Program (WISP); it is the law.

Financial Information: This is the most common cause of fraud and theft of small businesses.  You might think that if you don’t own a retail business, you are not exposed to this type of fraudulence.  The fact is, if you take credit cards or checks for payment of services you have potential exposure. If a credit card number is written down for payment and then tossed in the trash after entry, you have just presented an opportunity of theft.  If you have a cleaning company that comes in after hours, they have full access to that material.  If you own a restaurant/bar, and you allow patrons to run a “tab”, and you take a credit card and keep it on the counter, you are exposing that patron’s information in the open for a trained thief to view and steal. Remember, a person does not need to have the physical card to use it.  Again, if your business has a security breech, or a customer accuses you of fraudulent charges, then you will be investigated by the Attorney General based on the MA privacy laws.

These are just some of the potential internal and external risks you must assess as a business owner.  Ensure that you take all possible action to protect your business against fraud and theft.  Keep your good reputation intact and use the right HR strategies that are suited for your industry.

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