What to Do if an Employee is Caught Committing Fraud

The 2018 Association of Certified Fraud Examiners Report to the Nations found that private companies and small business suffer the most in the frequency of fraud (42 percent) compared to large corporations, government, and nonprofit organizations. That means fraud is impacting almost half of every small business in the country.

But what are smaller companies missing from the bigger picture that bigger companies aren’t? It’s simple enough: you’re supposed to trust your Human Resource (HR) department. You’re supposed to trust your leaders, managers, and employees. However, you cannot anticipate whether any of your employees will ever commit fraud against the company.

The cost can be high for a small business, with experts finding the median loss at least $164,000. That kind of money can stop a business from running completely. The worst case scenario including shutting your business doors entirely. However, what’s the best way to tackle the underlying problem?

How to Handle Fraud Scenarios

The ACFE’s report found from 2002 to 2018 that small business owners lack the necessary tools or training to help prevent fraud from occurring in their business. With that in mind, it’s clear that many businesses can do more to help catch fraud: it’s all in the awareness and training.

If you’re not sure what to do when an employee is caught committing fraud, here’s what you should know, via Small Business Chronicle.

  1. Gather evidence: This is the first thing that needs to be done. Once you’ve caught wind of any weird behavior, it’s time to start documenting everything that you can. If you heard about the act from another employee, thoroughly investigate before accusing. Whatever you do, always find evidence before coming at someone. That’s just asking for an EPLI lawsuit if you happen to be wrong.
  2. Confront the employee personally, in your office: Considering how sensitive the topic is, confronting the employee in private (once you have all the information) is the best thing that you can do. Don’t allow any other workers to put in their two-cents, hear or get involved. Get to the point and tell them you caught them in fraudulent acts. If they deny, bring up the proof. The next thing is finding out if they acted alone. Let them know there will be less punishment if everyone comes forward.
  3. Try to understand why they committed this act: If you can, write it down or ask to record it. Find out their train of thought and why this happened in the first place. But don’t let them know there could be termination or criminal charges yet, They could make matters tenser.
  4. Terminate said employee with no chance of coming back or a letter of recommendation for a future job. Make sure you put everything in writing and get the removal process done as quickly and silently as possible.
  5. If the money lost didn’t hurt your company, you may not want to press charges, particularly if your staffing crime insurance covered the cost. But if it’s substantial, expect to go to court.


About World Wide Specialty Programs

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