Skimming of cash - the classic debtors rolling scheme

There is a major difference between auditing and forensic accounting. Auditing is governed by materiality. Forensic accounting however is the opposite. Often, you are looking for one transaction, no matter how small, that will be the key. In a way, finding fraud is like taking a metal detector to the city dump. You find a lot of ‘stuff’, but most of it doesn’t help. You have to keep digging, searching for that transaction that will open the door.

We were recently engaged by a company to investigate a problem in their debtors department - specifically cash receipts that had been stolen.

Skimming of cash is known as ‘off-book’ fraud as money is stolen before it is entered in the accounting records of a company. Skimming can occur at any point when cash enters a business; in other words, anyone who deals with the receipt of cash may be in a position to skim funds. In a cash skimming and debtors rolling scheme, the perpetrator will credit one customer’s account with a payment received from another customer. This process will continue indefinitely until either the scheme is uncovered or the perpetrator makes restitution to restore the credits to the accounts.

In this case, our suspect was responsible for all aspects of the debtors and banking functions at her company. She would also handle calls from customers. This lack of segregation of duties created the opportunity for her to abuse the system and to falsify accounting records to conceal her theft.

It is common for employees involved in fraudulent activities to be fearful of taking leave, since the possibility exists of their scheme being uncovered during their absence from the office. Although our suspect was pregnant, she decided against taking any maternity leave and worked right up until the day before she gave birth. Remarkably, this scheme was uncovered during her first day away from work. A customer called to query a discrepancy on his account. The employee who fielded the call was alerted to the possibility of a problem. That’s when we were called in.

Our report concluded that the evidence inspected strongly supported the existence of a debtors rolling scheme perpetuated by our suspect, for the purpose of concealing the theft of cash from the company. The scheme had continued for over a year, indicating the consistency and deliberateness of the fraud. The suspect was suspended and the matter is scheduled for criminal court later this year. We are also in the process of recovering the stolen funds for the company.

At Horwath Forensics, we conduct forensic investigations of all kinds – quickly and efficiently. Give us a call if you suspect any wrongdoing in your business.