Top tips for investigating employee fraud

If you suspect an employee of fraud, there’s some key points you should know for the investigation that you’ll need to carry out.

14 November 2016

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The first consideration for many employers is whether or not to suspend. We would normally recommend that someone is suspended if under an investigation for fraud. The reason to suspend an employee under investigation for fraud is to get them away from the evidence to stop them from tampering with evidence.

Don’t underestimate the significance of suspending someone, particularly a senior employee. It’s sometimes said that ‘suspension is a neutral step’, however, it tends not to be. People who are suspended very rarely return.

You need to consider whether you have the evidence to back up the allegations that you’re making. So before you suspend, you should be reasonably sure that there’s something very serious which has gone on.

Don’t speak to the individual suspected of fraud until you have sufficient information and evidence.

One of the questions employers often ask is ‘should I contact the police?’ and generally speaking there’s no obligation to contact the police about your suspicions of fraud.

In fact, there’s a significant downside to going to the police first. The downside is that the police are likely to want to investigate and will ask you to stop your investigation until theirs is complete. The problem with this is that the police investigation could take weeks, or perhaps even months. During this time you’ll still be paying that individual and it could cost your business a lot of money. Meanwhile, you’re unable to carry out your own investigation.

Very often, managers and business owners don’t realise the significance of securing computer equipment. Too many people try to find out evidence themselves from laptops, computers and mobile phones and in doing so they destroy the evidence which is one of the biggest mistakes we often see our clients make when investigating potential fraud.

Searching through computer equipment for fraud can render that evidence unreliable, so if you suspect fraud that might be evidenced by computer equipment, whether that be a smartphone, desktop computer, tablet or laptop, secure the equipment and don’t touch it.

Keep it locked away in a room where you won’t be tempted to turn it on until a forensic computer expert with the necessary software can attend to extract the evidence. This way the evidence is sure to be presented to the court in an acceptable form that won’t be open to challenges, or claims that the evidence has been prejudiced by inexpert, amateur attempts to extract it.

Another important thing to bear in mind is that when you speak to the employee you suspect of fraud for the first time, you should do so under circumstances where they have all of their computer equipment on them. This way you can confiscate it from them at once and they do not have any opportunity to change, modify or destroy that evidence.

If you suspect an employee of defrauding your business, you should have set up a meeting in the first instance. This is because the law requires that as well as investigating the fraudulent act, you also need to investigate the potential explanations, justifications and excuses.

In order to investigate your employee’s explanation behind the suspected fraud, you must find out what that is at an investigation meeting. Too many employers find out these explanations for the first time at the dismissal meeting itself.

In the Employment Tribunal, to show you acted fairly as an employer, it’s often not the investigation into the offence of fraud that’s the most important thing but, showing that you investigated the explanation and the excuses just as much as you investigated the actual fraud.

Following the investigation meeting, if fraud is still suspected, the next step should be a disciplinary meeting and then, if you feel there is evidence of fraud at the end of that meeting, then there’s no doubt that dismissal would be justified.

Slater and Gordon act for SMEs who have been victims of fraud. Call us on 0330 041 5869 or contact us online and we’ll be happy to help you.

All information was correct at the time of publication.

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