Is Your Dealership at Risk?
How to Screen Potential Employees to Circumvent Occupational Fraud
Why do employees commit fraud? Is it because they are greedy or con artists? Do they possess some defect of character that separates them from normal, law-abiding citizens? The truth is that even good people commit fraud. Most fraudsters are not hardened criminals. According to the 2004 Report to the Nation on Occupational Fraud and Abuse, only 12% of fraudsters had a previous conviction for a fraud related offense. Most employees who embezzle do not take their jobs with the intention of stealing from their employer. The largest hurdle for most employers is understanding that any of their employees are capable of committing fraud.
How can your dealership best protect itself against employee fraud? The first step is straightforward – don’t hire an employee who has previously stolen. Consider conducting background checks for any potential employee who will have access to cash, checks, credit card numbers, customer credit applications or any other items that are easily stolen.
Before you hire someone, consider the following preventive steps:
Reference Checks
Surprisingly, very few employers actually call the references a candidate provides. Prepare and ask well constructed questions. Most employers operate under the theory that someone wouldn’t provide a bad reference.
Prior Employment Verification
Even though most employers will only verify position and dates of employment, you can usually tell by the tone of their voice what they think of the employee. Ask them if they would rehire the employee.
Drug Screening
People who are frequent drug users can be more prone to theft or fraud as their addictions may suddenly cause them to need cash thus stealing from your dealership. Conduct drug screenings for potential new hires and current employees, however, be sure to inform them of your intent to do so and obtain their written permission.
Criminal Conviction Checks and DMV
This is always a smart way to uncover issues such as a history of theft, violence or reckless driving. Most public records services (such as Nexis or ChoicePoint) have criminal conviction records for almost every large county in the U.S. If not, go to the courthouse or online to your local county or state websites and search the criminal conviction records.
Look at Credit Ratings
The law states that employers must clearly reveal whether they will conduct consumer credit checks of applicants. In many cases, just disclosing this information to prospects will deter those with something to hide.
Education and Certificate Verification
It is always a good idea to verify a person’s education. Also, if the person claims to have a license or other certification, verify by calling the issuing organization.
Get the Candidate’s Consent
Numerous federal and state laws, such as the Fair Credit Reporting Act, govern the gathering and use of information for pre-employment purposes. Many of these laws require that you obtain written consent before gaining the information listed above. It is also a good idea to obtain a signed authorization and release form from a potential candidate.
Although these steps won’t necessarily eliminate dishonest employees from getting hired, they will help weed out likely fraudsters. Intensive background checks will also communicate to workers you do hire, as well as existing employees, that your dealership takes fraud prevention very seriously.
Fraud is a cost of doing business that is not always known. We know about fraud only when it is discovered, and then it is usually too late to do anything to avoid disastrous losses. The most important line of defense in preventing fraud and abuse is to hire the right employees, and furthermore treat them fairly. Educate yourself and your employees about fraud and how to report it.
We can greatly assist your dealership by providing such antifraud services and education. Eliminating fraud completely is not possible, but with reasonable measures, its impact can be limited.
