The salami slicing theory is a tactic used in financial fraud, particularly in embezzlement schemes. It involves making numerous small, seemingly insignificant withdrawals or transactions over time, which are individually difficult to detect but collectively add up to a substantial amount.
Here's how it works:
- Small, Repeated Transactions: The perpetrator makes many small transactions, often below a certain threshold that triggers an alarm or review. These transactions might be disguised as legitimate expenses, such as office supplies, travel, or entertainment.
- Gradual Accumulation: Over time, these small withdrawals or transactions accumulate, leading to a significant loss for the victim.
- Difficulty in Detection: Since each individual transaction is relatively small, it's difficult to notice the pattern and identify the fraud.
Examples of salami slicing:
- A bookkeeper might steal small amounts from each customer's account, making it harder to notice the missing funds.
- An employee might make multiple unauthorized purchases using a company credit card, each below the limit requiring approval.
- A cashier might undercharge customers and pocket the difference, gradually accumulating a significant amount.
To prevent salami slicing:
- Implement strong internal controls, including regular audits and monitoring of transactions.
- Set clear spending limits and require approval for transactions above a certain threshold.
- Encourage employees to report any suspicious activity.
- Use software that can detect unusual patterns in financial transactions.
