What to do if Your Trusted Employee Commits Business Fraud

By Erik Larson posted 12-21-2020 23:09


Business fraud poses a serious risk to all kinds of businesses and therefore, it is important to understand the procedures you would follow in case this happens. Small companies are more exposed to employee fraud than larger established ones because they tend to be less relaxed in the implementation of control procedures. 

Whether you have put anti-fraud measures in place or not, even trusted employees can commit fraud. This is what you should do in case of fraud.

Ascertain the basis and extent of fraud

After reviewing the internal accounting, you need to ascertain the extent of the fraud. You can later decide whether to file a claim or not, depending on the terms and conditions stipulated by the insurance company. If your insurance policy allows for claim expense, you can engage a third party to help you compile the claim.

Many insurance companies require clear evidence and support for fraud-related claims. Hiring a criminal lawyer may be a good idea to help you navigate the criminal investigation procedure for purposes of providing reliable evidence. San Diego Criminal Defense & DUI Attorney Vik Monder is a known name for criminal cases. He is approachable in the office but when it’s the courtroom, he’s aggressive, to get you the best results. 

Notify your insurance company

It is important to insure your assets against damage and theft to avoid potential business loss. The insurance policy states the terms regarding the timing of the fraud notification. If you delay notifying the insurance company, you may be denied coverage even if the loss was covered in the policy.

Before making compensation, the insurance company may require to conduct investigations to establish the circumstances leading to fraud. Reveal as much information as possible regarding the crime and stick to other instructions given in the policy.

Review business policy regarding fraud

You need to review fidelity coverage to establish the limit and retention value. Retention is the amount or value of goods that have to be stolen for the insurance company to compensate you. If the amount stolen is less, the chances are that you may not need to involve your insurer for compensation. 

It is also important to determine if you have claim preparation expense coverage. Some policies reimburse the insured after incurring out-of-pocket expenses for hiring a third party to facilitate the investigation, such as a forensic accountant. Such expenses may be reimbursed by the insurance company up to a particular limit.

Don’t terminate the employee immediately

If your trusted employee commits fraud, you may feel hurt and betrayed and may be tempted to terminate them. Resist the urge to do so and instead send them on paid leave while you continue performing investigations to get the facts.

After gathering evidence, interview the employee with support from another person to witness the conversation. Consider using a private room for questioning and create an environment to help the employee feel at ease. 

Use open-ended questions and avoid accusing the employee as much as possible. Ensure that you document every detail of the conversation with the help of another person.

Determine the employment steps to take

If you believe that the employee committed fraud, you may notify law enforcement depending on how you feel about that employee and your comfort level. If you choose to press charges against the employee and have notified the facilitator, involve the facilitator in the whole process to avoid prejudicing their rights. 

When you are fully convinced that the employee committed the crime, you may terminate them. If the employee admits that they committed the offense, you may ask them for a signed confession, but this may attract a restitution payment plan. However, an employee acquitted with such a crime may rarely admit and put it in writing.