Misappropriation of assets – skimming schemes

skimming is the removal of cash for a victim company before the transaction is entered into the accounting system. Since skimming is an off-book type scam (it is never recorded), there are no direct audit trails, making the scam difficult to detect. The employees with the option of committing skimming schemes are those who deal directly with customers or those who handle their payments. This article will cover the four main categories of skimming schemes and discuss some of the red flags for fraud detection.

Unregistered sales

The most common form of skimming is not recording the sales of goods, but collecting the money from the customer. Despite controls such as registry tapes, managers and monitoring equipment, employees may have to manipulate the system to prevent fraud detection. In some examples of unregistered sales, the fraudster manipulates the register tape so that it does not print on the tape when transactions are entered into the system. One means of detection would be to pre-number the system records so that if skimming was performed when the scammer re-turns the register tape, there would be a breach of the pre-numbered transactions. Businesses must be particularly careful about unannounced sales arrangements with revenue streams that are difficult to monitor and generally unpredictable in value.

Unexpected sales and receivables

In these skimming schemes, the customer receives a receipt, which is for the total transaction amount, but when the employee enters it into the system they register either a discount or a sale of lower value. To cover their tracks, they can manipulate carbon copies of the receipt by writing their own amounts or generating incorrect discount documentation. Fraud prevention is possible by requiring sales discount approval, checking receipts for changes, and tracking the history of the cash sales discounts.

Theft of control through the mail

In this special scheme, sales are registered in the company’s system, but the payment on the receivable is not received. The person responsible for receiving payment in the company physically steals the check and deposits it in the bank. If the employee is able to overcome the problems of depositing checks such as endorsement and convincing the bank that the transaction is legitimate, they must deal with how to hide the fraud when the customer’s balance becomes criminal. If the employee is not careful, the company sends late messages to customers, which are likely to result in complaints from customers with a copy of the canceled check. Scammers have avoided this by intercepting the messages or manipulating the customer’s address to redirect the mail. A big red flag for the possibility of committing this scheme is when the employee receiving the mail is also the same person who has worked to register the receipt. By properly separating customs and only marking all deposits for deposits, a company can easily reduce the potential of this skimming scheme.

Short-term skimming

The last category of short-term foaming is less about stealing the money than borrowing them to accumulate earnings from the money’s time value. By deferring receipt of payment, the employee can use the money for short-term investments that generate interest on the perpetrator. The means of accessing the money can be any of the forms above, but there is a clear distinction that in this case the money is eventually returned to the company and the only loss is the time value of this receipt. Red flags in this area will include higher day sales or unusual payment timings compared to historical customer payments, especially when looking at specific customers.

Fraud Prevention

Regardless of the method of foaming, the most important means of prevention is to establish proper internal control. Separation of duties and employee knowledge of the company’s policy of theft can eliminate the possibility and rationalization of committing these frauds. When early detection fails, foaming can lead to very costly losses and a corporate culture that ignores the signals of fraud.