Traditionally, we have concentrated on identifying our customers, but what about our employees and third-party service providers?
Research has shown, through use of Suspicious Activity Reports, that, corporate losses, due to employee theft and embezzlement exceed $1.5 B a year. The best way to reduce insider abuse is to stop it before it starts. This process should begin during the hiring process, exercising the same precautions we would use when establishing a new account relationship. The most important way to deter employee theft is to be aware and prepared for the fact that it happens. Dishonest employees avoid detection when managers refuse to accept the idea that trusted employees are targeting them.
Solid KYE policies and procedures should form part a sound compliance program, on the anti-money laundering, ethics, fraud and FCPA fronts. All relationships between an organization’s clients, employees, and third party service providers carry a level of risk, however the risks posed by employees may ultimately be the greatest risk an organization faces. This is because employees have internal access and provide access to external sources.
It is often said that an organization’s greatest asset is its human capital; it is also often said that the highest returns carry the greatest risk. This latter statement may not hold true within the context of KYE, given that well known, as well as well trained employees, have consistently proven to be a significant variable in an organization’s strong bottom line and returns. Yet, where, weak KYE and internal control measures abound, corporate losses, due to employee theft and embezzlement increase.
Some Myths and Misconceptions:
Management does not need to tell employees about policies on employee theft because they already know.
Well-paid employees are less likely to steal. Honest and loyal employees will report other employees who steal.
Newer employees commit employee theft, while senior employees can be trusted. Employee theft is generally detected in its early stages.
Some Facts and Reality:
The opportunity to steal is more important than the need for money. A majority of employee theft goes undetected by management.
Less than 10% of the employee population is responsible for more than 95% of the total losses from employee theft.
Nearly every business experiences some degree of employee theft. Nearly 1% of all bankruptcies are caused by employee theft.
All said, KYE (Know Your Employee) is thus as important to organizations as KYC (Know Your Customer).