Cash Larceny - Fraud Prevention & Fraud Detection

Cash Larceny - Fraud Prevention & Fraud Detection

Cash larceny is the theft of cash that has already been accounted for in the books. Since there generally is a paper trail it is considered to be one of the easiest frauds to detect and prevent through the use of internal controls. In this section, I'll discuss the different ways fraudsters can steal incoming cash.

1. Stealing Cash from the Register

Theft Prevention

Register theft is the most common form of cash larceny for the obvious reason that it is an easily accessible point of contact with cash receipts. At the time the cash is stolen from the register there already is a record of the transaction on the register tape. Register theft creates an imbalance between the cash in the drawer and the transaction totals on the register tape. In order to detect register theft it is necessary to reconcile both cash balances and track individual cashiers to ensure there are not employees that consistently have less cash in the drawer than cash balance on the register tape. Fraud prevention in this case is most effectively accomplished by informing employees of the reconciliation, assigning a password protected register to each cashier, and restricting the amount of cash present in the register with cash pickups.

Cash Larceny - Fraud Prevention & Fraud Detection

2. Personal Check IOUs

This method of cash larceny is less effective in that it requires the fraudster to cover the balance with a personal check or transfer ticket that makes the cash balance reconcile. The biggest problem with this is that without removing the check the fraudster is no better off then when they began therefore they must find a way to prevent it from being cashed. Another inherent problem with this scheme is that the personal check can be detected by an observant employee that is reconciling the register. Companies should be create a policy that prevents employees from cashing their own checks therefore when they find one there is no reason it should be there unless there is a cash larceny scheme.

3. Reversing Cash Transactions

Reversing transactions is a way fraudsters can cover their tracks when committing register theft. By creating fraudulent returns or voids on the register they decrease the amount of cash that should be in the register and then they are able to steal the difference. Some schemes have involved the use of white out to change the cash balance on the register tape but if the tapes were properly examined it would be difficult to cover up the fraud. The easiest control to implement to prevent cashiers from having the ability to cover their tracks would be requiring a management override code in order to issue a refund or void.

For more on register theft check out Cash Larceny [http://www.executivefraud.com/Fraud_Blog.php/2007/06/14/cash_larceny_part_2] (Part 2)

Cash Larceny - Fraud Prevention & Fraud Detection

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