From employee fraud to fake customer fraud: five examples of business fraud claims

Would you like to know why business fraud insurance is essential and how it can help your company? These 5 examples of business fraud claims will give you a clearer idea of why business fraud insurance is indispensable.

Security for your company – Why business fraud insurance is essential

Economic crime is one of the biggest threats to companies. Fraud, embezzlement, and digital crime can cause enormous financial damage – both from internal and external perpetrators.

Business fraud insurance protects companies against precisely these risks by covering the losses incurred, thereby ensuring financial stability.

But what does such damage look like in practice? We use real cases to show you how companies can be affected in various ways – and how Allianz Trade's Business Fraud Insurance offers protection in such moments.

From theft and embezzlement by your own employees to so-called “social engineering fraud” – these examples illustrate why protection is essential.

Employees of a Greek Subsidiary Implicated in €25 Million Corruption Scandal

Business operations at a German exporter's subsidiary were running smoothly, but beneath the surface, a major corruption scandal was developing. For nine years, staff members secretly funneled approximately €25 million in commissions and bribes to a Greek businessman. This businessman then distributed kickbacks to Greek state officials, ensuring favorable outcomes for his sponsors in public contract allocations. Unbeknownst to the German management, this covert operation was underway.

The conspiracy unraveled when the public prosecutor's office intervened, revealing the full extent of the corruption. The ensuing trial lasted several years, resulting in severe penalties: a €300,000 fine and the confiscation of unlawfully obtained profits totaling tens of millions of euros.

The scandal proved even more costly for the company, as internal compliance audits and external legal fees amounted to an additional €5.7 million. Fortunately, the company had foresight in securing business fraud insurance, which provided coverage for criminal acts by employees in subsidiaries. This policy also covered 25% of internal and external loss ascertainment costs, calculated as a percentage of the sum insured.

While the loss of profits and penalties were not covered under the business fraud insurance policy, Allianz Trade indemnified the proven bribes in the middle single-digit millions to the policyholder. Additionally, 25% of internal and external loss ascertainment costs were reimbursed, showcasing the critical role of Fidelity Insurance in mitigating financial risks associated with employee misconduct.

Dairy Producer Defrauded Out of €130,000

For two decades, an Austrian dairy producer and an Italian bottling machine manufacturer have enjoyed a successful business relationship. Having previously purchased 10 machines, the dairy producer was ready for machine number 11.

After signing the contract, the dairy producer received a payment request for €130,000, seemingly from Italy. This time, however, the funds were to be transferred to a new bank account in Estonia. Not suspecting foul play, they proceeded with the transfer. When a second unexpected payment request arrived, suspicions arose. Upon contacting the Italian manufacturer’s managing director, they discovered he was unaware of any payment requests and had not received the €130,000, either. The email correspondence was a sophisticated scam.

The fraudulent email addresses mimicked the originals, with a subtle change: the email domain was altered from .com to .ga, unnoticed by the dairy. Additionally, the documents bore the genuine signature of the Italian CEO, leading the dairy producer to believe in their authenticity. The fraudsters must also have had access to the servers of the machine supplier.

Though the perpetrator remains unidentified, Allianz Trade indemnified the dairy producer for the full amount, ensuring their liquidity remained intact.

Lamp Manufacturer Loses €400,000 to Fake Customer

A promising opportunity arose for an electrical goods manufacturer when a French department store chain expressed interest in expanding its product range to include his lamps and light fittings. Despite the surprise, given his products were typically sold in furniture shops or specialist lamp retailers, the new customer alleviated doubts through a series of emails. The customer's creditworthiness was verified, and with a green light, the deal proceeded.

Although things did not run quite as smoothly as they should—delivery addresses changed at short notice and consignments were rerouted—the manufacturer delivered lamps worth over €400,000. Upon sending the first invoices, the accounting department of the French chain expressed astonishment, claiming no lamps were ordered.

And this is how the scam came to light: a fraudster impersonating a purchaser from the store chain ordered the goods to be delivered to distribution centers, where they vanished. Allianz Trade swiftly and efficiently indemnified the manufacturer for €300,000, the agreed maximum liability amount, preventing serious financial difficulties.

Over €300,000 Lost in Construction Materials Misappropriation

A long-term employee, entrusted with the materials management for a small building contractor, exploited his position over three years. As a member of the workers’ council and an apprentice instructor, he was highly trusted. Unfortunately, this trust was misplaced. He ordered high-quality materials containing precious metal compounds, falsely recording them as dispatched to various construction sites.

In reality, the materials were not used on-site in the quantities ordered but were sold to scrap dealers and listed for sale on eBay. The misappropriation was discovered when a contractor’s employee spotted the specialist material, which should have never been available outside the firm, on eBay. Alerting their boss, they set up a trap by simulating a purchase as a test. Confronted with the accusations, the employee reluctantly admitted to "irregularities."

An internal audit, conducted at significant cost and effort, uncovered the fraudulent bookings, with costs amounting to €25,000. The full extent of the fraud was revealed gradually, leading the company to pursue criminal charges. Due to the numerous proven cases, the employee was convicted.

Allianz Trade provided a provisional indemnification of 50% of the estimated probable loss in advance, as the prosecution with overwhelming evidence met the preconditions for this. The remaining loss will be indemnified upon the final judgment. 

Checkout Cashier Embezzles €25,000 Through False Return Receipts

A shop assistant, known for her loyalty and reliability, was promoted to cashier after 10 years with a food retailer. However, appearances can be deceiving. After a year, she began processing fictitious return receipt, pocketing the cash.

Two years later, colleagues noticed the unusually high number of reversals and alerted the shop manager. CCTV footage confirmed her guilt, capturing her setting aside purchase receipts left by customers, later booking them as reversals and keeping the cash. She confessed to embezzling €25,000 over time.

Fortunately, the firm was protected by our business fraud insurance policy, allowing Allianz Trade to indemnify the entire amount, transferring the debt repayment responsibility to them.

These cases show that economic crime and business fraud are omnipresent – and even the best prevention, control and security measures cannot always prevent them. A single incident can often threaten the very existence of an organization.

With Business Fraud Insurance from Allianz Trade  you get reliable protection against financial losses caused by fraud – whether by your own employees, contractors or external perpetrators. Don't be caught off guard – protect your company now!