When employee loyalty becomes a blind spot for fraud

Twenty years of loyal service may earn an employee the trust of their colleagues and management, but it does not make them immune to fraud.

In fact, the (ACFE) *Occupational Fraud 2026: A Report to the Nations *found that fraud cases involving employees with more than ten years of service resulted in median losses of US$200,000, four times the median losses associated with perpetrators who had been employed for less than a year.

The issue is not confined to private businesses. In South Africa, a government audit reported in October 2026 flagged 4,323 suspected payroll irregularities involving individuals whose employment details could not be verified.

While the cases have not all been confirmed as fraud, the findings highlight the importance of robust verification processes and effective oversight. “Whether in the public or private sector, controls cannot depend on familiarity, reputation or the assumption that existing arrangements are working as intended,” says David Loxton, CEO of Loxton Forensics.

Some of the most difficult conversations organisations face after discovering fraud begin with disbelief. Not because the losses are especially large, and not because the scheme itself was particularly sophisticated. The shock often comes from the person at the centre of it.

Everyone knows them. That’s a hard pill to swallow.

Perhaps they have spent 20 years with the business. They have helped train new employees, built strong relationships across departments, and become part of the institutional memory that keeps things running smoothly. Their experience is respected and their loyalty has never really been questioned.

Trust can create blind spots

Trust plays an important role in every organisation. Without it, teams struggle to collaborate and leaders struggle to delegate. People need to believe in one another for businesses to function effectively.

Problems arise when trust quietly starts taking the place of oversight.

Familiarity can create a sense of comfort that gradually changes the way controls are applied. Questions that would normally be asked become less frequent.

Processes that once received careful attention start feeling unnecessary because everyone believes they already know the person involved. None of this happens deliberately.

In fact, these vulnerabilities often develop in environments where relationships are strong and intentions are good. Over time, however, confidence can turn into assumptions, and assumptions can create blind spots that nobody recognises until something goes wrong.

This is one of the reasons fraud can be so difficult to understand after the fact. When concerns eventually surface, organisations are often left trying to reconcile two realities.

On the one hand, there is the person they thought they knew. On the other hand, there is evidence that points to behaviour nobody expected.

That tension leads to a question investigators hear time and again.

“How did we miss this?”

Unfortunately, the answer isn’t a simple one.

People naturally place greater trust in those they know well. Leaders are no different. When somebody has earned a reputation over many years, it becomes harder to imagine that normal controls should still apply with the same consistency.

Yet strong controls were never designed because organisations distrust people. They exist because human behaviour is complex and circumstances change.

Financial pressure, personal challenges, opportunity, or gradual rationalisation can influence decisions in ways that are difficult to predict. Longevity and good character do not make anyone immune to those realities.

The ACFE’s 2026 report reinforces the importance of this distinction, identifying inadequate internal controls and the overriding of existing controls among the leading factors that enabled occupational fraud.

Controls are not simply administrative requirements; they are safeguards against the assumptions that can develop when trust goes unquestioned.

This should not diminish the value of experience or loyalty. Many organisations owe their success to employees who have devoted years of their careers to helping build something meaningful.

What it should do is remind leaders that trust and oversight work best when they support one another.

Healthy controls create clarity because they provide reassurance and protect the organisation and the people inside it.

“Perhaps most importantly, they ensure that trust remains something that is earned and maintained rather than something that quietly becomes a substitute for accountability,” Loxton concludes.

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