Ghost Employees

As long as a company has a payroll office, the risk of having a ghost employee exists. A ghost employee refers to someone, either real or fictitious, who is on the company’s payroll but does not actually work for the company. A ghost employee is most frequently a recently departed employee, a made-up person, or a friend or relative of the fraudster who created the employee.
There are a few steps that are taken in order for the ghost employee to be successfully added. First, the fraudster has to add the ghost employee to the payroll or, if it is a recently terminated employee, change their information. In order to do so, an employee has to have access to the payroll records. Timesheets and wage rates are then submitted or set in the payroll system. A paycheck is then issued to the ghost employee after passing the supervisor’s approval of payments. Lastly, a check or electronic deposit is received by the fraudster, or accomplice, and converted for their use.
The potential loss to the victim organization of a ghost employee scheme could be enormous due to the recurring nature of the theft. After the perpetrator has successfully created a ghost employee in the payroll system, the process of issuing paychecks ensures a steady stream of funds to the fraudster.
Joseph T. Wells’ article, “Keep Ghosts off the Payroll,” explains how Turner, a payroll specialist, almost got away with creating ghost employees. By simply peering over the shoulder of a co-worker, Turner gained access to the login information to the payroll system. Turner then added a couple of phony employees to the system, entered a false wage statement, and arranged for their payments to be directly deposited into his account. He then prepared a fake payroll summary to be signed by a supervisor. Additionally, Turner made filing copies of the checks on white paper, unlike the yellow paper