Tag Archives: employee theft

Holiday Season Hiring Brings Increased Fraud Risk

Identity Theft & Fraud Blogs

Written By ESR News Blog Editor Thomas Ahearn

Thanksgiving week signals the official start of the holiday season. Along with turkey, football, presents, and good cheer, the holiday season brings an increase in seasonal hiring. However, fraud experts interviewed for an article posted on InsuranceJournal.com warn that businesses skipping their usual due diligence background checks when hiring to quickly add workers for the holiday season face an increased risk of fraud. The article is available at http://www.insurancejournal.com/news/southcentral/2014/11/18/347427.htm. Continue reading

Annual Retail Theft Survey Shows More Dishonest Employees Stole from US Retailers in 2012

Employee theft rose in the U.S. in 2012 as more than 70,000 dishonest employees were apprehended and over $50 million was recovered from employee apprehensions, according to the 25th Annual Retail Theft Survey by leading loss prevention firm Jack L. Hayes International. More information about the survey is available at http://hayesinternational.com/news/annual-retail-theft-survey/. Continue reading

Employee Theft Rising as Dishonest Employees Steal More Profits from US Retailers

A study of 23 large retail companies found that 71,095 dishonest employees were apprehended for employee theft in 2012, up 5.5 percent from 2011, while more than $50 million was recovered in those cases, up 7 percent from 2011, according to the 25th Annual Retail Theft Survey conducted by Jack L. Hayes International. The survey, which also found that poor employment screening contributed to the rise in employee theft, is available at http://hayesinternational.com/news/annual-retail-theft-survey/. Continue reading

Databases Tracking Employee Thefts to Be Examined by FTC for Fair Credit Reporting Act Compliance

Large databases that track employee thefts and could prevent workers accused of theft in the past from finding new jobs in the retail industry will be examined by the Federal Trade Commission (FTC) for compliance with the Fair Credit Reporting Act (FCRA), according to a report from the New York Times. The article – ‘Retailers Track Employee Thefts in Vast Databases’ – is available on the Times website at http://www.nytimes.com/2013/04/03/business/retailers-use-databases-to-track-worker-thefts.html. Continue reading

Background Checks Prevent Employee Fraud in Workplace According to Safe Hiring Expert at ACFE Conference

In an article from the Orlando Business Journal, ‘Pre-screening new employees prevents fraud in workplace,’ Attorney Lester Rosen, CEO of Employment Screening Resources (ESR), indicated there is a “statistical certainty” that a company that does not background check job applicants will hire an employee with an “unsuitable” criminal record or false credentials. Rosen made the comments while discussing employee fraud and how to prevent it in the workplace at the Association of Certified Fraud Examiners (ACFE) 23rd Annual Conference and Exhibition in Orlando, Florida. The article is available at: http://www.bizjournals.com/orlando/news/2012/06/22/pre-screening-new-employees-prevents.html. Continue reading

Background Check Expert to Speak at ACFE Annual Fraud Conference on How to Stop Employee Fraud

Attorney and background check expert Lester Rosen, Founder and CEO of Employment Screening Resources (ESR), will present a session titled ‘Employment Background Checks: Stopping Employee Fraud at the Point of Entry’ on Tuesday, June 19, 2012 from 1:40 PM to 3:00 PM at the 23rd Annual Association of Certified Fraud Examiners (ACFE) Fraud Conference & Exhibition in Orlando, Florida. For more information about the session, visit http://www.esrcheck.com/Newsletter/ESR-Speaks/Employment-Background-Checks-Stopping-Employee-Fraud-at-the-Point-of-Entry-130/. Continue reading

Federal Bill Seeks To Ban Credit Report Checks for Most Employment Screening

By Les Rosen, President of ESR & Thomas Ahearn, ESR Staff Writer

Employers may have one less employment screening tool at their disposal if a federal bill banning credit checks during most employment background checks becomes law.

Recent legislative efforts throughout the country have sought to ban credit reports from the employment screening process. Three states – Washington, Hawaii, and Oregon – currently have restrictions on an employer’s use of the credit history of an applicant or employee in making employment-related decisions. There is even pending legislation at the federal level – HR 3149, which is currently in committee – to limit credit checks.

Now Senator Dianne Feinstein (D-CA) has introduced a senate bill – SA 3795 – as part of an amendment to the S.3217 – Restoring American Financial Stability Act of 2010 bill, an effort by lawmakers to improve accountability and transparency in the financial system and to protect consumers from abusive financial services practices. 

Much like the pending HR 3149, SA 3795 would restrict employers from using aconsumer’s creditworthiness, credit standing, or credit capacity, in making any employment decision or for the basis of taking any adverse action even if the employer gets authorization for the background check report from the consumer. The exceptions to this prohibition on credit checks during employment screening would be for:

  • National security or FDIC clearance;
  • Employment with state or local government agency which requires the use of this information;
  • Employment in a management position with access to customer funds at a financial institution; or
  • As otherwise required by law.

Because Senator Feinstein’s amendment to the Financial Services reform bill would effectively prohibit the use of credit history in employment background checks except in extremely limited circumstances — mostly government employment – trade associations representing millions of employers are planning to write members of the U.S. Senate to express opposition to banning the use of credit checks for employment purposes.

Employers argue that credit checks during employment screening are done responsibly, and are not barriers to employment. They may check credit history during background checks to help them determine whether a prospective employee is a possible risk to the financial health of a business or to its customers. Prohibiting credit checks in screening makes employers, other employees, and customers vulnerable to fraud and identity theft.

Also, employment credit checks are not as common as most people think, according to a recent survey from the Society for Human Resource Management (SHRM) that found only 13% of organizations conducted credit checks on all job candidates while 40% did not conduct any credit checks. Of the 47% of organizations that did perform credit checks on selected job candidates, most were for executive positions, positions with financial responsibility, or for positions with access to confidential or proprietary information.

Unfortunately, personal financial health can be an indictor of potential employee fraud. The Association of Certified Fraud Examiners (ACFE) reviewed occupational fraud between 2006 and 2008, and found that the top two “red flag” warnings exhibited by perpetrators of fraud leading to the crime were instances of living beyond their financial means (39% of cases) or experiencing financial difficulties (34% of cases). 

While it is wrong to say all financial difficulties lead to fraud, some employers believe it is also wrong for Congress to undercut fraud prevention by outlawing the use of credit report information that may show a correlation between past behavior and future fraud. Credit checks of potential employees protect companies – particularly small businesses – from fraud. According to ACFE, the median loss suffered by organizations with fewer than 100 employees was $190,000 per incident, higher than median losses in large organizations. Overall, employee theft accounted for over $15 billion in losses annually, with companies losing a median of 5% of their annual revenue to employee fraud.

Consumers have significant protections when employers use credit reports during background checks as part of their hiring process, as the use of consumer reports in employment situations is tightly regulated:

  • Prior to requesting a consumer credit report, an employer must provide to the prospective employee a written notice stating the source of the information and how it will be used.
  • The employer must also provide a copy of the consumer credit report to the consumer upon request, and prior to taking an adverse action.
  • If an adverse employment action is taken against a prospective employee due to the information contained in a consumer credit report, the user must provide the name and contact information for the reporting agency to the consumer and explain the reasons for the action.
  • Under the FCRA, any person who willfully fails to comply is liable to that consumer in an amount equal to the sum of (1) (A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or (2) such amount of punitive damages as the court may allow; and (3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
  • Credit scores are not provided to employers for employment decisions. 

For more information on credit reports, background checks, and employee theft and fraud, visit Employment Screening Resources (ESR) at http://www.esrcheck.com.

Sources:

http://www.acfe.com/occupational-fraud/occupational-fraud.asp

http://www.shrm.org/Research/SurveyFindings/Articles/Pages/BackgroundChecking.aspx

http://www.kstreetresearch.com/documents/050410Amendments/FEINSTEINAMENDMENTSA3795.pdf

http://www.govtrack.us/congress/bill.xpd?bill=h111-3149

http://www.govtrack.us/congress/bill.xpd?bill=s111-3217&tab=amendments