Employee Activity Monitoring and Lifestyle Audit: A Key Defense Against Internal Fraud

All over the world, it is believed that the Human Capital of every institution are the most valuable assets contributing to growth and profitability. But the same valuable assets have also contributed to the collapse of many institutions in the world via lifestyle choices, fraud, embezzlement, corruption and bribery. According to The Fraud Factor Report, 2024, published by FICCI and EY, companies lose around 5% of their revenue to organizational fraud annually, amounting to over US$5 trillion globally.

According to the ACFE Report to the Nations 2024, occupational fraud remains widespread among most countries in the world with about 5% of revenue lost to fraud annually. Common schemes include asset misappropriation, corruption and billing fraud, with an average loss of US$145,000. Procurement fraud leads the charge, closely followed by deceptive practices in sales, distribution, e-commerce, inventory management, workforce operations and ethical breaches.

Bringing this home, the 2024 Bank of Ghana Fraud Report highlights a 33% increase in fraudulent activities involving staff of financial institutions. This, the report attributed to weak internal control procedures, including lack of staff activity monitoring and lifestyle audit.

This article is aimed at helping business owners spot red flags, ask thought-provoking questions to stimulate further discussions at our offices and make some recommendations to reduce the menace of staff fraud within our firms.

Effective employee account/activity monitoring and lifestyle audits are two of the glaring deterrents and detection tools used by business owner to prevent or reduce internal fraud or staff vulnerability to the activities of money launderers and terrorist. By extension, ensuring compliance with industry regulations and managing remote teams effectively would help enhance productivity and security of the business. But what exactly does staff account or activity monitoring entails, and how can businesses implement it ethically and effectively?

Employee Transaction Monitoring, with particular emphasis on Anti-Money Laundering (AML), refers to the systematic surveillance and analysis of financial transactions conducted by employees of a financial institution to detect, investigate, and mitigate potential money laundering, terrorist financing, or other illicit activities. This monitoring encompasses reviewing deposits, withdrawals, transfers, and other account movements linked to employee-controlled accounts, corporate expense reimbursements, payroll disbursements, or third-party interactions. Other non-financial institutions may employ the lifestyle audit approach to monitor their employees’ activities. This process is mostly done on a risk-based approach targeting internal staff, particularly those in positions of influence, such as executives, relationship managers, tellers/ cashiers, administration/ operations personnel, who may exploit their roles to facilitate suspicious activities. Lifestyle audit is done by comparing an employee’s known income sources to their visible lifestyle and acquired assets. Lifestyle audits go beyond payslips and declare earnings to uncover financial inconsistencies, unexplained wealth, and lavish spending that may indicate fraudulent activity. Lifestyle audit is not judging but rather spotting risk. By scrutinizing assets, expenses, and financial behaviour of employees, businesses can expose fraudsters who live beyond their means and protect their financial well-being.

Business owners should be on the lookout the following specific behaviour within their companies that scream “possible fraud” or red flags (not exhaustive) for immediate action taking:

• Employees with lifestyles that don’t match their salaries
• Unusual financial transactions and offshore accounts
• Lavish or fraudulent expense claims.
• Sudden unexplained wealth (eg. Employee buys a new land cruiser with cash 3 months after joining company)
• Frequent and consistent withdrawal from account (eg, GH¢5 transfer every week to another account)
• Expensive assets in others’ names. (eg. House in wife’s name, car in brother’s name, but employee controls them)
• Hidden business interests and conflicts of interest
• Employee driving and/or using an expensive brand of car or mobile phone (eg. GH¢8,000 per month salary employee driving a Mercedes Benz GLE 450)
• Employee addicted to gambling and betting
• Employee always borrowing from colleagues
• Social media flaunting (eg. Dubai trips, champagne on Instagram but employee earns a GH¢6,000 salary)
• Unwillingness to declare assets.

One benefit Employee Account Monitoring and Lifestyle Audit brings to business owners is the prevention of fraud as they affect all three (3) sides of the Fraud Triangle: opportunity, pressure, rationalization. Opportunities are kills, rationalization is removed and temptation or pressures are reduced.

Under the BoG/FIC AML/CFT/CPF Guidelines of September 2025, financial institutions in Ghana are required to monitor employee accounts and perform lifestyle audits. Failure to comply attracts sanctions and penalties

Another benefit of Employee Account Monitoring and Lifestyle Audit is increasing reputation. Customers turn to trust the business knowing that money is not lost to internal fraud. Investors love strong anti-fraud controls when deciding on where to invest their money.

For Employee accounting monitoring and lifestyle audit to be implemented effectively without killing the morale of staff members, there should be transparency and fairness in the execution. There should be policy and procedure manual detailing what staff accounts will be monitored, the thresholds to be monitored, dos and donts of the operations of a staff account, the penalties or sanctions for non-compliance. This must be communicated to staff at least at the onboarding stage. The policy must apply to all employees, including the C-suite executives, to set the correct compliance tone.

There should be constant training for all staff on the Employee Account monitoring and lifestyle audit policy and procedural manual to remind staff of their responsibility and accountability.

Business owners should ensure proper Know Your Employee (KYE) principles and procedures are in place and develop a system for the update of employee data. The system should encourage employees to disclose information to HR when there is a change in employee status. There should be annual declaration of employees’ assets or source of wealth.

For employee account monitoring and lifestyle audit exercise to be successful and accepted by all, it should be done in a confidential, transparent, collaborative manner without judgement.

Would you mind doing me a favor? Share this article with someone so that the awareness of employee account monitoring and lifestyle audit could be spread to prevent internal fraud.

If you require further information on this article, please contact Richieson @ [email protected].