Employee embezzlement on the rise: Essential background check strategies for Carolina employers

Employee theft isn't always dramatic or immediate. Sometimes, it plays out quietly over years—until the damage is irreversible. That's what happened in a recent South Carolina case, where a trusted employee managed to embezzle $1.7 million over the course of eight years. For small and midsize businesses across the Carolinas, the story is a sobering reminder that internal threats are often the hardest to see coming.

In this blog post, we'll break down why embezzlement is on the rise, what warning signs to watch for, how to respond if you suspect internal fraud, and how to create a stronger, more secure company culture to prevent losses going forward.

When trust goes unchecked: A $1.7M embezzlement scheme in the Carolinas

A recent federal case revealed how one employee's scheme devastated a small business. According to reports from WYFF News and the Department of Justice, a South Carolina woman was sentenced to 51 months in prison after making more than 1,000 unauthorized bank deposits into her own account. The fraud spanned nearly a decade—all while she held a position of trust.

The consequences were severe: the business collapsed entirely, leaving owners and employees alike in financial ruin. It's a powerful example of how even long-time team members can exploit gaps in oversight.

Why embezzlement cases are becoming more common

Employee embezzlement isn't a new issue, but it is becoming more frequent. Several factors are contributing to the trend:

• Small businesses often lack robust internal controls or full-time financial oversight.
  
  
• Access to digital banking tools makes it easier for unauthorized transactions to go undetected.
  
  
• Financial stress or personal hardship can motivate long-term schemes.
  
  
• Many companies still rely heavily on trust and informal processes when handling finances.
  
  

The combination of access, opportunity, and limited accountability creates the perfect environment for internal fraud to thrive.

Key warning signs of internal fraud or embezzlement

Being able to recognize red flags early can help prevent major losses. Here are some common signs that something might be wrong:

• Sudden or unexplained lifestyle upgrades that don't match salary levels
• Defensiveness when asked about financial records or duties
• Discrepancies in reports, balances, or transaction logs
• Reluctance to take time off or delegate responsibilities
• Unusual payment patterns or unauthorized vendor accounts

No single behavior confirms fraud—but consistent patterns or gut instincts shouldn't be ignored.

What to do if you suspect employee fraud

If you notice warning signs or have a gut feeling that something is off, take steps to address it carefully and professionally:

• Avoid confronting the employee directly without evidence
• Secure and preserve relevant records, including digital logs and bank statements
• Limit the individual's access to sensitive systems during the review period
• Document unusual behaviors or discrepancies for future reference
• Consider bringing in a licensed corporate investigator or forensic accountant to conduct a thorough review

Acting swiftly and thoughtfully can prevent further loss while protecting your team and business.

How to reduce your risk moving forward

Taking action after fraud is discovered is important—but so is putting safeguards in place to prevent it from happening again. A proactive approach to employee vetting and internal security can protect your business before problems start.

Using background checks to prevent costly internal losses

A comprehensive background check can reveal red flags before an employee ever gains access to your company's finances. It's not just about checking for criminal records:

• Employment history verification can reveal gaps or inconsistencies.
  
  
• Credit checks may identify financial stress or prior bankruptcies.
  
  
• Reference checks and alias searches can uncover hidden concerns.
  
  

It's also important to re-evaluate employees when they change roles—especially when those roles include access to financial accounts or sensitive data. Basic HR software isn't always enough. In higher-risk situations, working with a licensed investigator can give you a clearer picture.

Building a culture of security from the start

Preventing internal theft isn't just about catching bad actors. It's about creating an environment where transparency, accountability, and preventative practices are baked in:

• Clearly define financial roles and responsibilities
  
  
• Separate key duties, like payment approvals and account reconciliation
  
  
• Perform regular internal audits or bring in third-party reviews
  
  
• Provide secure, anonymous channels for reporting concerns
  
  

When security is part of your culture, you create fewer opportunities for fraud to take root. The Association of Certified Fraud Examiners reports that organizations with anonymous reporting systems experience significantly lower fraud losses.

Protect your company with proactive vetting and investigative support

Internal threats don't always come from outside your business. In many cases, the real risk lies with trusted employees who have access to your financial systems. But you don't have to manage that risk alone.

With proper vetting, clear oversight, and expert investigative support, you can spot warning signs early and prevent long-term financial damage.

At Davis & Forest Investigative Group, we offer employee background investigations and corporate services that help you identify potential risks, verify credentials, and safeguard your business from internal fraud. Contact us at (704) 912-2010 or complete our contact form to get the conversation started.