Employee Fraud: Warning Signs

Most corporate fraud is employee fraud. ‘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.

A lack of resources means that police response 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:

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

If you do suspect fraud, we recommend that you take legal advice immediately. 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 your suspicions prove incorrect or you act in a way that breaches an employee’s employment law rights. In addition, the way you gather evidence or record personal data on employees must comply with the Human Rights Act and the Data Protection Act. Always carry out a full identity check on any new employee.