Skimming revenue, part three

Stealing cash payments from customers

By Regent Emeritus Joseph R. Dervaes, CFE, CIA, ACFE

Fraud's Finer Points

In the past two columns, we've discussed many methods fraud perpetrators use to steal checks from the organization and then convert them for personal benefit. Employees perpetrate these skimming frauds by removing funds from the organization prior to recording accountability for the transactions in the accounting system. Here we'll discuss some of the methods employees use to skim funds by stealing customer payments made in cash.

How it's done
Skimming currency from customer payments is quite simple. The cashier merely has to talk customers out of a receipt or give them a bogus cash receipt form for any transaction for services rendered by the organization. Either method works if the customer isn't concerned by either of these conditions and if the organization hasn't implemented internal controls over the revenue sources at this location. Business continues normally, and everything is just fine. But is it? I think not.

Case No. 1: Department of transportation ferry division revenue ($118,000 loss from two ticket takers at one terminal over several years)
The State of Washington Department of Transportation operates the largest ferry system in the world, employing almost 200 ticket sellers at 14 terminals. The department observed a problem when conducting market testing at one ferry terminal. A ticket taker collected a fare but failed to enter the cash receipt transaction on the cash register and didn't give the customer a receipt. The department subsequently videotaped the ticket taker on numerous occasions and determined that the individual was regularly skimming revenue. For example, the employee failed to record 70 transactions during one full shift of work. The employee also kept track of the irregular transactions on a piece of paper in the ticket booth and removed currency from the cash register till drawer regularly throughout the business day. The ticket taker admitted misappropriating funds for about 13 years, which was substantiated by the deposit activity in the employee's personal bank account and a change in lifestyle after beginning employment at the terminal. The employee said that other ticket takers were skimming, which was later confirmed by videotapes from surveillance cameras recording another employee. This second ticket taker admitted misappropriating funds for about three years. Both employees began skimming money just to pay for lunch but the schemes grew to include evening and weekend entertainment and outings, expensive vacations, and vehicles and other recreational equipment. Both employees were sentenced to one year in jail. The first paid back $40,000 and the second almost $78,000. Their restitution came from retirement benefits and the selling of residences and vehicles.

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