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Internal Theft – Fake Commercial/Industrial Accounts – Check the Vendor!

Published by: ScrapWare On: December 9th, 2013 In: Blog, Internal Theft

We have seen many internal theft scams over the years.  These are scams that are perpetrated by company employees – office, scale or trading staff.

The vast majority of these personnel are honest.  However, some are not, and they can cause significant financial damage to your business.

Lately we heard about scams involving traders or sales reps.   You hire them to find local accounts and buy material.  Typically these accounts are machine shops, auto repair shops, printers, manufacturers, etc.  They are commonly called Commercial Vendors or Industrial Accounts and can be very valuable to a recycling business.

The dishonest employees found a weakness in a company’s internal procedures and exploited it.

The scams worked as follows:  Fake Commercial/Industrial accounts were setup by the trader.  Fake Purchase Tickets were entered for “delivered” material by the trader.  Real Settlement checks were sent to a PO Box and later cashed by the above trader.

All of the above worked perfectly.  That is until owners and managers discovered their actual physical inventory did not remotely reconcile with their Inventory Reports and Purchase Reports.

ScrapWare has many features to prevent internal theft, but they work in conjunction with proper due diligence and internal controls by owners and managers.

These scams may have failed if the new account would have required container service.  This would have required collusion with both scale and office personnel.   This adds more complexity and detection possibilities to the scam.

Owners and managers need to subject new accounts to a reality check.  It’s pretty simple to vet these accounts.  You need to check the address and schedule an appointment to visit their facility.  Once there, meet with their personnel and see what they do and exactly what scrap material they really generate.  Calling a new account is not enough, you just don’t know to whom you are speaking and this could be staged.

Another simple internal control is to have new accounts entered only by a trusted manager and then vetted as above, Purchases entered only by Scale personnel and Settlements processed only accounting staff, owners or managers.

The above steps will serve to ferret out dishonest employees and serve as an ongoing deterrent to internal theft by existing employees.

This entry was posted on Monday, December 9th, 2013 at 11:48 am and is filed under Blog, Internal Theft. Both comments and pings are currently closed.

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