A Wolf in Sheep's Clothing - Remaining Vigilant against Employee Fraud
While the threat of cyber fraud has made headlines in recent years, business owners should remain vigilant as general fraud, such as employee fraud, still exists and is more common than you might think.
Employee fraud typically takes the form of stolen money or goods but can also be less obvious. It can be committed in a number of ways, including embezzlement, theft, falsification of financial records, or misuse of company resources. This conduct is often in breach of the employee’s contract or the fiduciary duties owed to their employer.
Any employee can commit fraud, including high-ranking employees such as executives and managers. Our experience, however, shows that the most damaging employee fraud is often committed by employees in the accounts department in whom the employer places significant trust.
In many cases, employee fraud is discovered through internal audits, the reporting of suspicious activity by other employees and sometimes even by chance. When such fraud is suspected, it is important for the company to take immediate action to investigate the matter and to take appropriate legal action against the employee if necessary.
Employee fraud can cause significant damage to businesses, not only from the financial loss of assets stolen but also from potential damage to reputation, loss of trust, and reduced productivity in expending time and resources to address the fraud.
There are several safeguards you can implement to combat employee fraud. These include having strong internal controls and oversight mechanisms in place, clear policies and procedures for handling company funds, regular audits and monitoring of financial transactions, and training. Another key safeguard is to ensure no single person is in control of the company’s accounts.
If a company discovers that an employee has committed fraud or misappropriated funds, they should consider taking urgent action to enforce its legal remedies including:
Commencing civil proceedings to recover the misappropriated funds;
Terminating the employment of the employee; and / or
Reporting the matter to law enforcement for criminal prosecution.
If you discover employee fraud, we can help. At Scoglio Law, we can assist businesses in pursuing the recovery of misappropriated funds.