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How Reference Checks Can Help to Prevent Workplace Fraud


How Reference Checks Can Help to Prevent Workplace Fraud

Checking references may be time-consuming, but one phone call can save your company from a devastating fraud.

Employers are often stunned to find that a valued employee has been committing workplace fraud, but statistics show that it is often the most trusted employees who steal. Many of these employees are terminated without charges ever being filed, leaving them free to target the next company and trusting employer. Introducing these fraudsters into your organization can have devastating consequences. Aside from workplace fraud, they can also open you up to legal trouble and even bankruptcy.

But with so many variables affecting a hiring decision, how do you ensure you hire only employees with high ethical standards? The answer is to do your homework, say the experts. To ensure you aren't the next fraud target, conduct a thorough reference check on potential employees before you make a job offer.

The amount of checking you do should be determined by the level of the position, advises Tracy Coenen, forensic accountant, CFE and author. Higher level and more sensitive positions warrant more checking. The degree of background checking you conduct on a potential hire should reflect the potential for damage.

Where to Start

Education and past employment should first be confirmed says Coenen. And she urges employers to call references.  “I can’t tell you how many times I’ve heard of people putting references on their resume without checking with the person and the person actually has negative things to say.”

Depending on the level of the job, you may also want to consider conducting bankruptcy, civil and criminal checks. Find out if the candidate:

  • Has past criminal convictions
  • Has any ongoing civil cases
  • Is being sued
  • Has ever  declared bankruptcy

Financial pressure is a significant risk factor for fraud, so it’s important to be aware of any potential financial issues before offering a job to a candidate.

Checking with Previous Employers

This is a phone call that a lot of employers hate to make, because previous employers sometimes won’t release information. But there are compelling reasons to make this call.

Sometimes, asking a previous employer a few general questions about the person's job responsibilities and what they were like to work with can  provide information about how a potential employee would fit into the company's culture.

But don't automatically disqualify a candidate for one bad reference, urges Coenen. Look at the big picture. Several bad references, on the other hand, should be a red flag.