What to do if an employee commits fraud

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Employees are the backbone of any business and can be it’s greatest strength; the majority of employees will have applied to their post in an honest and transparent manner and will have approached employment with the intention of wanting to do well, work hard, maintain their job and the company that provides this and possibly to even progress. 

A good and prudent business values and looks after their staff, supporting their wellbeing and offering opportunities for them to develop personally and professionally. This allows positive relationships to build between employer, or management, and employee and is conducive to a productive and pleasant working environment and, therefore, a healthy and successful company.

However, whilst employees overall bring benefit to any company, they can also be the most significant chink in its armour and open the business up to risk and vulnerability. 

Employees naturally have inside access to, and knowledge about, the business they work for; this could be in a physical sense in that they work within roles that place them in contact with stock, supplies and concrete assets of the business; it could be with regard to finance in that they handle monies belonging to or received by the company, undertake invoicing or payroll tasks, submit or manage expense claims or are involved with accounting or the management of company funds; it could also be in terms of the information that the company holds be this intellectual property, personal details of staff and customers, plans around business development and financial records for the business; it may be that the employee has access and input to technology or computer and online systems for the business such as their website, marketing, communications and recording processes. 

It is not possible to run a business without opening yourself up to some degree of risk from employees or those working within the company in some capacity; even the smallest of businesses will have to take on some form of additional help at a point if they are to progress or develop. The employment of others is a necessary risk for the health and advancement of any endeavour.

The issue comes with the minority of employees who are not acting with the best intentions and are invested in obtaining their own financial or individual gain at the expense of the health and wellbeing of the company. Employee fraud is a significant risk to every business, whatever their size, and comes in many forms and can be hard to detect.

The majority of people want to see the best in others and believe that they have honourable intentions; a good business wants to trust its staff and have a positive working relationship with them. Whilst constant suspicion and mistrust of every staff member is not advocated, or conducive to a healthy and successful business, it is important that appropriate levels of vigilance are applied and that monitoring systems are in place to protect and safeguard a company from the potential risks posed by employees. 

Prevention is the best form of managing the risk of employee fraud, and limiting damage caused to the business. However, what if this hasn’t worked and you suspect employee fraud is occurring? This is an alarming and anxiety provoking realisation, and you will want to act immediately to put an end to the fraudulent activity, enable damage limitation and probably tackle the responsible individual. But how do you go about this without placing the business at further risk?

If you have direct evidence that a criminal act has been committed such as theft of stock recorded on CCTV or company property having been found on the person themselves, you can go straight to the police and report the crime. You are then able to dismiss the individual for gross misconduct as this is a pretty clear-cut situation and should not incur any challenge. Details of correct dismissal procedures and guidance around this can be found on www.acas.org.uk but if someone has irrefutably stolen from your company and a police investigation is underway, you’re in a strong position to sack the perpetrator.

You can also report employee fraud to Action Fraud; this is the UK’s centre for the reporting of fraud and cybercrime and is delivered jointly by City of London Police and the National Fraud Intelligence Bureau who undertake investigation into fraud reported. Action Fraud can be accessed via www.actionfraud.police.uk and accepts reports of fraud from victims, businesses, and witnesses alike. There are options within the online reporting tool to make Action Fraud aware of corporate employee fraud, procurement fraud or the specific act of retaining a payment that has been made in error. 

You may initially want to go straight to the source of the concern and speak to the perpetrator to make them aware that you are alerted to their behaviours and, in doing so, prevent further fraud occurring. This can be a helpful action in some situations, especially lower key fraud such as abuse of flexible working arrangements, misuse of company time or resources such as computers or submitting moderately inflated expense claims. A conversation to remind the employee of expectations and consequences regarding these matters can often be enough to put them back on the right track and prevent the issue developing further. 

However, approaching the employee directly and making them aware that you have detected their behaviour can also have negative outcomes such as causing them to become more covert and secretive, preventing you from gaining increased evidence of the fraud and therefore having the option to take more robust action in the future. If you are incorrect in your accusation or do not have adequate evidence, the employee could also have justification for legal challenge themselves, placing the business at risk of other harm.

The above methods of addressing or reporting fraud are useful if you have reasonable grounds to think that fraud has been committed and at least some form of evidence to substantiate this. The majority of employee fraud, however, is a little more complex and difficult to evidence, meaning that it will be more challenging to address and resolve. You may not even be sure that fraud has taken place but have a persistent suspicion or gut feeling that something is going on. You may be worried that you could be wrong and that taking the direct action of officially reporting this will do harm to working relationships or the business itself if your suspicions transpire to be unfounded. 

In situations where there is not clear evidence and confirmation that fraud has been committed, or who is the perpetrator, it is wise to gather further information and understanding and strengthen your position before taking direct or formal action that will be difficult to reverse once wheels are in motion. 

It may be that you want to attempt to build your evidence of the fraud and undertake investigation yourself; you can gain clarity over your suspicions with a little deeper digging into records and accounts, cautiously speaking to colleagues and customers to see if this provides any further indicators or information about the concern and close observation of the suspected individual and heightened monitoring. The use of surveillance equipment such as CCTV can also be of use to information or evidence gathering. 

If, however, you don’t feel comfortable or equipped to undertake your own investigation or you simply don’t have the time, or if you are worried that you will be unable to achieve the quality of evidence required to effectively address the problem it is wise to recruit the services of a professional in this field; Corporate investigation agencies are the experts in corporate investigation and the evidencing of employee fraud.

A private investigator will have the skills, knowledge and resources as well as the understanding of legal frameworks to undertake a thorough investigation into the fraudulent activity in a legitimate manner and produce robust and irrefutable evidence of any wrongdoing occurring, allowing you to tackle or report the fraud without any fear of recrimination.

They also work quickly and efficiently, meaning that your business can benefit from the shortest timescales between detecting the fraud and taking decisive action to stop it. Hiring a private investigator is the guaranteed way to protect your business and manage employee fraud.

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