Employee Fraud – What to Watch Out For

Fraud is estimated to cost the UK economy between £13 and £16 billion a year and fraud by employees accounts for sixty per cent of all frauds committed against business. In a study carried out by Leicester University, over seventy per cent of employees admitted they would commit fraud if they knew they would get away with it. ‘Targeted’ frauds, often backed by organised criminals, are also becoming more common. In these cases, an employee (often using a stolen identity) is ‘planted’ in an organisation with the express intention of carrying out a fraud and avert detection in an investigation.

A lack of resources means that the response of the police to fraud is patchy, particularly outside London. When it comes to gathering evidence, the onus is likely to be on the employer.

According to CIFAS, the credit industry’s counter-fraud watchdog, warning signs of potential employee fraud include:

1. staff under stress without a high workload;
2. marked personality changes;
3. always working late;
4. reluctance to take holidays or to delegate work, especially when on holiday;
5. unexplained wealth or living beyond apparent means;
6. sudden change of lifestyle;
7. customer complaints of missing statements or unrecognised transactions;
8. new staff resigning quickly;
9. cosy relationships with suppliers/contractors;
10. suppliers/contractors who insist on dealing with just one individual;
11. rising costs with no explanation;
12. key employees having too much control or authority without audit checks; and
13. employees with external business interests.

If you do suspect fraud, we recommend that you take legal advice immediately in order implement a strategy to gather admissible evidence to maximise the prospects of recovery after an investigation. Alleging fraud against anyone is a serious matter and evidence must be on hand to prove the elements of fraud. Whilst your main aim will be to obtain evidence that will stand up in court, you should proceed with caution. There is a risk of being taken to an Employment Tribunal should suspicions prove incorrect or if the employee’s employment rights are breached. In addition, the way you gather evidence or record personal data about employees must comply with the Data Protection Act.