| Skimming is the removal of cash for a victim | | | | The person in charge of receiving payment in the |
| company before the transaction is entered into | | | | company physically steals the check and cashes it |
| the accounting system. Since skimming is an off | | | | at the bank. If the employee is able to overcome |
| the books type of fraud (it is never recorded) | | | | the issues with cashing the checks such as |
| there is no direct audit trail therefore making the | | | | endorsement and convincing the bank that the |
| fraud difficult to detect. The employees with an | | | | transaction is legitimate then they must deal with |
| opportunity to commit skimming schemes are | | | | how to conceal the fraud when the customers |
| those who deal directly with customers or those | | | | balance becomes delinquent. If the employee is |
| that handle their payments. This article will cover | | | | not careful the company will send late notices to |
| the four main categories of skimming schemes | | | | customers that will likely result in complaints from |
| and discuss some of the red flags for detection | | | | customers with a copy of the canceled check. |
| of the fraud. | | | | Fraudsters have gone around this by intercepting |
| Unrecorded Sales | | | | the notices or manipulating the address of the |
| The most common form of skimming is not | | | | customer in order to reroute the mail. A major |
| recording the sale of goods but collecting the | | | | red flag for the opportunity to commit this |
| money from the customer. Despite controls such | | | | scheme is when the employee that receives the |
| as register tape, managers, and surveillance | | | | mail is also the same person that has the job of |
| equipment, employees may be able to manipulate | | | | recording the receipt. By properly segregating |
| the system in order to prevent fraud detection. | | | | duties and marking all checks for deposit only, a |
| In some examples of unrecorded sales, the | | | | company can easily reduce the potential of this |
| fraudster manipulates the register tape so that it | | | | skimming scheme. |
| does not print on the tape when transactions are | | | | Short-Term Skimming |
| keyed into the system. A means of detection | | | | The final category of short-term skimming is less |
| would be pre-numbering the system records so | | | | about stealing the money than borrowing it in |
| that if skimming were perpetrated when the | | | | order to accumulate earnings from the time value |
| fraudster turn the register tape back on there | | | | of money. By delaying the receipt of payment |
| would be a break in the pre-numbered | | | | the employee is able to use the funds for short |
| transactions. Companies should be specifically | | | | term investments generating interest for the |
| careful of unrecorded sales schemes with | | | | perpetrator. The means of obtaining access of |
| revenue streams that are difficult to monitor and | | | | the money could be any of the forms above but |
| generally unpredictable in value. | | | | there is a clear distinction that in this case the |
| Understated Sales and Receivables | | | | money is eventually returned to the company and |
| In these skimming schemes the customer | | | | the only loss is the time value of that receipt. Red |
| receives a receipt that is for the total amount of | | | | flags in this area would include a higher days sales |
| the transaction but when the employee enters it | | | | outstanding ratio or unusual payment timing when |
| into the system they record either a discount or | | | | compared to historical customer payment |
| a sale of lesser value. In order to cover their | | | | especially when looking at specific customers. |
| tracks they can manipulate carbon copies of the | | | | Fraud Prevention |
| receipt by writing in their own amounts or | | | | Regardless of the method of skimming the most |
| generating false discount documentation. Fraud | | | | important means of prevention is establishing |
| prevention is possible by requiring approval for | | | | proper internal controls. Segregating duties and |
| sales discounts, checking receipts for alterations | | | | employee awareness of the company's policy on |
| and tracking the history of cashiers' sales | | | | theft can eliminate the opportunity and |
| discounts. | | | | rationalization of committing these frauds. When |
| Theft of Checks Through the Mail | | | | early detection fails skimming can lead to very |
| In this particular scheme the sale has been | | | | costly losses and a corporate culture that ignores |
| recorded into the company's system but the | | | | the signals of fraud. |
| payment on the receivable has not been received. | | | | |