Skimming Fraud Definition
Skimming fraud is the theft of cash from a business prior to its entry into the accounting system for that company. Although skimming is one of the smallest frauds that can occur, they are also the most difficult to detect.
Skimming is also known as an “off book” fraud because the cash is stolen before it is entered into the bookkeeping system. In business, skimming is the most difficult to detect because there is not direct audit trail that can be followed to the source. Often, skimming fraud is discovered by accident, or if a company suspects that it is going on. A company will often investigate for skimming fraud if a certain part or the business as a whole is low on cash for no reason. If the problem is ongoing companies will often investigate themselves or hire someone to do so like a Certified Fraud Examiner (CFE).
(How are you’re dealing with a fraudulent employee? Learn more about what it feels like to have fraud committed against you here.)
Grant owns a sandwich shop named Real Good Wich. Lately, Grant has noticed that the cash account has been dwindling, and decides to hire Mason a CFE to investigate. Mason arrives on the scene and orders a sandwich. After observing the cashier for a while he notices that one of the employees is pocketing the cash when the exact amount for a sandwich is paid. Mason takes note of this and returns to Grant and explains the problem. He explains that when the exact amount is paid the employee can simply pocket the cash. This is because there is no need to open the register for change and no sale needs to be recorded. Mason also provides a quick fix to the problem.
If Grant were to provide a free sandwich to his customers if no receipt were given to them on the sale it would significantly reduce the amount of skimming fraud. Grant takes Mason’s advice and fires the employee, and implements the free sandwich. After a while Grant sees that his cash has increased as well as overall profits.
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