Red Flags

When used in the context of fraud, the term "red flag" refers to something that demands attention and provokes a response. A red flag indicates that something may be wrong. Sometimes such red flags are referred to as fraud indicators or tells.

Recognizing red flags is an important element in the fight against fraud. While a red flag doesn’t always mean that fraud is present, it means that it certainly can be and that some level of investigation should be undertaken.

One of the most valuable tools found throughout this website is our collection of red flags, the fraud risks to which they are related, and, especially, the controls that can be used to detect and possibly prevent the existence of fraud in a given organization, program or process.

General List of Employee Red Flags:

Employee Red Flags

• Employee lifestyle changes: expensive cars, jewelry, homes, clothes.
• Significant personal debt and credit problems.
• Behavioral changes: these may be an indication of drugs, alcohol, gambling, or just fear of losing their job.
• High employee turnover, especially in those areas that are more vulnerable to fraud.
• Refusal to take vacation or sick leave.
• Lack of segregation of duties in the vulnerable area.

Behavioral Red Flags

• Borrowing money from co-workers.
• Creditors or collectors appearing at the workplace.
• Gambling beyond the ability to stand the loss.
• Excessive drinking or other personal habits.
• Easily annoyed at reasonable questioning.
• Providing unreasonable responses to questions.
• Refusing vacations or promotions for fear of detection.
• Bragging about significant new purchases.
• Carrying unusually large sums of money.
• Rewriting records under the guise of neatness in presentation.