Employee Fraud
We are experts in advising businesses concerning matters of employee fraud and misconduct in Australia.
For a fraud to occur three things must exist: opportunity, need and justification. Unfortunately, even with the most advanced risk protection systems in place, opportunities still exist for employee fraud to occur.
Due to the trust and confidence placed on them, it is not uncommon for employees to exploit their position by misappropriating company funds or assets. At Duxton Hill, we work with employers who are victims of employee fraud to terminate rogue employees, identify the true extent of the fraud, protect remaining assets to prevent further loss, and recover misappropriated funds or stolen assets.
Types of Employee Fraud
Employee fraud can take many forms.
Most often it occurs when the employee has a position of trust and responsibility relating to the finances of a company, such as a bookkeeper. However, fraud can also be perpetrated by senior officers or directors and occur in a variety of ways.
Common types of employment fraud include:
- Embezzlement – A person entrusted with funds or property belonging to someone else misappropriates such funds or property for their personal benefit.
- Misappropriation of intellectual property – Unlawfully using a trademark, patent, copyright or design. E.g. counterfeit products of luxury items.
- Secret commissions – A non-disclosed arrangement whereby a party receives a financial benefit for influencing or inducing another to enter into a contract or purchase goods or services.
- Diversion of business – A practice whereby employees deliberately drive business opportunities away from one company to another.
- Falsification of accounts – Where a person dishonestly makes false, misleading or deceptive accounting records.
Perpetrators are likely to have a keen understanding of the inner workings of a business, including how to avoid oversight. This knowledge paired with intimate access to company systems and information, means that fraud can go on undetected for a long period, often until large discrepancies appear.
Employers who discover or suspect fraud must be able to act quickly to safeguard company property, lockdown evidence, and recover misappropriated assets.
Businesses often respond by simply calling in their usual lawyer or reporting the matter to police. This is a mistake. Fraud law is complex and requires a high degree of specialisation to secure positive outcomes. Lawyers who dabble in this area run the risk of disastrous consequences for themselves and clients.
Police do not recover stolen funds in employee fraud. Their job is to obtain convictions for criminal conduct. Civil action is the most effective method of asset recovery.
Our Approach to Employee Fraud
At Duxton Hill, we prioritise working efficiently and discreetly in finding a resolution, investigating allegations with discretion and taking legal action swiftly.
Our connections to specialists in forensic technology and accounting mean we can quickly identify offenders and collect the requisite evidence to substantiate claims. Even in certain cases where long periods of time have elapsed since the initial offending, we have achieved positive results and recovery for our clients.
Duxton Hill has extensive experience navigating the law in this area, considering asset recovery prospects alongside maintaining the integrity and continuity of your business.
We aim to provide clarity in what can be a distressing time and guide our clients through the avenues that are available to them. We have successfully acted for many organisations against crooked employees, helping restore trust and order to our clients’ businesses.
FAQ
What are the Early Warning Signs of Employee Fraud?
Common signs of employee fraud to look out for include:
- unexplained financial discrepancies in invoices, trust account and/or other records;
- refusing to abide by internal policies e.g. bypassing approval steps;
- complaints from internal members and/or customers relating to funds/finances and;
- a reluctance to engage in internal reviews.
It is important to be vigilant in identifying patterns of employee fraud to prevent losses and reputational damage.
What happens if fraud is identified?
We typically recommend urgent civil proceedings to freeze the employee’s assets and seize evidence. Such draconian court injunctions have been referred to as the law’s “two nuclear weapons.” Once such orders are granted our experience is that the legal proceedings resolve promptly with a favourable negotiated settlement – thus avoiding the delay and substantial costs associated with protracted legal proceedings.
What is Employee Fraud?
Employee fraud refers to fraudulent acts carried out by employees usually in a position of trust or access to company/business accounts for their own benefit. Employee fraud comes in many forms and includes misappropriation of monies belonging to a business or company, fraudulent accounting and/or sham/inflated invoices.
What Should I Do if I Suspect Employee Fraud?
If you suspect an employee has been engaging in employee fraud, it would be beneficial to gather and preserve as much evidence as possible including forensic imaging of electronic devices. Further, a covert investigation is recommended to identify as accurately as possible the extent of the loss, so it’s best not to alert the employee that they are under suspicion of fraud. Legal assistance should be obtained as soon as possible to advise on the avenues of recovery and employment law considerations.
How Do You Conduct Employee Fraud Investigations?
As stated above, the best investigation is a covert investigation without the knowledge of the rogue employee. Generally, employee fraud investigations begin by collating as much evidence such as financial records, employee activities and employee communication as possible. Such evidence may be used by our lawyers and investigators to conduct interviews, open-source checks and if necessary forensic accountants may be engaged to analyse financial records. Oftentimes an investigation does not need to be completed to take remedial action, such as obtaining asset freezing orders and dismissing rogue employees.
