The age old crime of embezzlement is alive and well, and so are other white-collar crimes. Here’s how to protect yourself.

Maybe your idea of embezzlement comes from the 1960s thriller film Psycho, when Janet Leigh drives off into a blinding rainstorm after rooking the real estate office where she works of $40,000. As she makes her getaway, her boss thinks she’s depositing the cash in the bank. We all know how that story ends.

For John Tschohl, president of Service Quality Institute, of Bloomington, Minnesota, much of his own embezzlement story echoes the famed noir film (minus the gory shower scene). And like the Hitchcock film, his own experience with embezzlement will haunt him forever.

At Service Quality Institute, Tschohl and his team of eight staffers, whom he trusted implicity, provide customer service-training programs for other businesses. The42-year-old company has about $2 million in annual revenue. For two years, starting in 2011, an employee stole hundreds of thousands of dollars from his business. Tschohl never saw it coming. And he’s unlikely to ever see a dime of that money.

Yes, embezzlement and other white-collar crimes are alive and well in the U.S., and small businesses need to protect themselves against them just as much today as 50 years ago. While extreme, Tschohl’s experience is illustrative of the kind of malfeasance that even the most aware business owners fall prey to.

And it’s particularly important to keep vigilant, as white-collar crimes can go on for a long time before they are discovered, often taking months or years for investigators to gather the evidence they need to simply get rid of the perpetrator. Many embezzlers never wind up in jail, often because of the personal relationships they have with you or other key management, and the money they steal is rarely recovered.

“Never trust anyone, never,” Tschohl says. It’s a sad lesson to learn.

For Tschohl, the final tip-off came when his bookkeeper, a woman who had worked for the company for five years, whom he trusted so completely he gave her authority of accounting, bank accounts, and check signing, handed him a hand-written note. Tschohl knew his company had just received a $48,000 wire transfer from a client, but he couldn’t see it anywhere in the company books.

Tschohl had asked the bookkeeper to provide information about the transaction while he made afternoon phone calls. A few minutes later, she presented him with the note, giving him details about the wire, rather than the printed spreadsheet he expected.

“I kept asking about it, and I was not seeing where the wire was going,” Tschohl said. “It raised my suspicions.”

Two days later, while Tschohl and his employees were enjoying themselves at the company picnic, on his boat on Lake Minnetonka, Tschohl instructed his accountant to go to the company’s empty office and review the books. It didn’t take him long to discover lots of irregularities, including recent changes to vendor accounts, double payments of the bookkeeper’s salary, and checks she’d written out to herself for thousands of dollars. The magnitude of the scheme began to unfold upon closer inspection. It turns out the bookkeeper had been embezzling about $20,000 a month from the business for close to two years. All told, the losses to Tschohl are about $330,000, he estimates, much of it lost to gambling sprees at casinos on a nearby reservation.

“I had a minor heart attack,” Tschohl says. “I am a small business owner and that is real money.”

Unfortunately, Tschohl is not alone, either in Minnesota or the nation in general.

Fraud’s Snapshot

About $3.5 trillion of corporate fraud happens annually worldwide, about 60 percent of which occurs in the U.S., according to the Association of Certified Fraud Examiners in its 2012 global fraud study, its most recent.

The Federal Bureau of Investigation pursued 726 cases of corporate fraud in 2011, compared to 529 in 2007, an increase of 37 percent, according to the FBI’s most recent numbers.

Asset misappropriation, which includes embezzlement, makes up about nearly 90 percent of white-collar crimes, according ACFE. And it’s costly. The median loss for frauds committed by owners or executives is $573,000, while the median loss caused by managers is $180,000 and the median loss caused by employees is $60,000, ACFE finds.

The consequences of white-collar crime can be particularly threatening for you and your small business.

“Smaller companies are dealing with a number of factors that might create a perfect storm for impropriety in their ranks,” says Eric Yaffe, co-chair of white-collar investigations at Gray Plant Mooty, a law firm in Washington D.C. “They have less money and don’t necessarily have funds to take steps to prevent criminal activity, like lawyers and compliance experts and other personnel, who might help them.”

In Tschohl’s part of the country, corporate crimes are quite common, says Cory Cardenas, a detective with the Bloomington Police Department who investigated Tschohl’s case and scores more like it over the past decade. The city is ideally situated near the Mayo Clinic, the Mall of America, and the Twin Cities. So it has thriving service and retail industry. To Cardenas, Tschohl’s case is a cookie-cutter example of the other white-collar crimes he’s seen.

“She was the stereotypical bookkeeper working for the typical business that uses Quickbooks for finances, and they trusted her,” Cardenas says. “She was the vice president and a manager, and essentially she was a one-stop shop.”

Cardenas and other experts say there is usually a specific personality associated with embezzlement. Generally speaking, they can tend to be a little arrogant and have a big feeling of entitlement.

More specifically, perpetrators tend to be better-educated than the average, often with a college education, ACFE’s research indicates, and they often live beyond their means, as can be witnessed by fancy cars that exceed salary level, or other extravagances. In fact, Cardenas says, a financial crisis, like overwhelming debts, can often kick would-be embezzlers into action.

Little Recourse

Unfortunately, your prospects of recovering assets once the crime has been discovered are next to nil, experts say. Part of the reason is that it usually takes a long time to discover what’s happened–about 18 months, according to ACFE. After that, depending on the complexity of the crime, it can take months or even years to gather enough evidence to prove the crime.

“In order to have a solid fraud examination, you need someone who is unbiased,” James Ratley, chief executive of ACFE says. ” Never let the employee know they are suspected of anything and bring in a professional.”

That includes conducting a financial audit, rounding up all the appropriate documents from banks and other financial institutions, obtaining search warrants, and then waiting for a usually overworked state district attorney to prosecute the case, assuming you decide to go to trial.

“Your case has to be tied up with a nice bow,” Cardenas says.

Still, nearly two thirds of white-collar crimes like embezzlement wind up in court, ACFE reports, and more than half of those cases plead guilty or no-contest. But nearly half of cases result in no recovery of losses because the money has been spent.

In Tschohl’s case, the bookkeeper took out cash via checks made out to herself, and then spent the cash in casinos that aren’t liable for the losses.

Prevention Is Paramount

Fortunately there’s plenty you can do to prevent such white-collar crimes from happening.

Start by conducting a thorough background check of your employees before you hire them, including an examination of criminal records. Tschohl didn’t do that. If he had, he might have discovered, as Cardenas soon did, that his bookkeeper had been dismissed from her previous job because of credit card fraud.

Even more important, never give one person total control of your books and your finances. Make sure you divide those tasks up, and set up a system of checks and balances, preferably with two to three people. Tschohl says now he’s the only one who signs checks for the business, which forces him to review everything before it’s sent out. Other experts, like Ratley, say you can make your environment even safer by assigning one person to bookkeeping, one person to accounts receivable and payable, and another person to signing the checks.

Regularly review all of your bank statements, Tschohl advises, and conduct a full audit of your books every year. While the total sum of these safety precautions could cost you several hundred to several thousand dollars a year, it’s much better than losing a crippling sum of money by letting things slide.

“Many small business owners are very trusting people who are doing their jobs and creating their businesses,” Tschohl says. “The point is there are many people who will rip you off left and right.”