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Employee Investigations: are you exposing your business to risk?

Recent research by accountancy firm BDO found that there was more reported fraud in the East Midlands last year than in Scotland, Wales or Northern Ireland. The figure in the East Midlands totalled £18 million!

A recent blog, from a contact of mine at the F Word, highlights the fact that businesses very often experience fraud involving someone ‘on the inside’, usually an employee.  The blog gives some examples of common employee frauds and useful steps to take to prevent it happening.  Worth a read!

But what if your business is unfortunate enough to be the victim of employee fraud?  

What should you do to deal with the problem and minimise the risk to your business? 

Well, it’s important that you get to the bottom of the issue quickly and preserve the evidence. You’ll also need to manage the employee (or employees) involved within the procedural (and often complex) framework of employment law. Doing so properly will mitigate the risk of further liability to your business from employment claims, in addition to the financial loss you may have already suffered as a result of the fraud itself!

I’ve been involved in a number of fraud investigations and thought it would be useful to set out a few tips for ensuring your investigations don’t trip you up:

  • Preserve the evidence: evidence may come in the form of paper documents or electronic data. Either way it’s important it’s properly preserved for use at internal hearings, legal proceedings or for providing to law enforcement agencies. Electronic evidence can be imaged by forensic IT consultants to prove that you haven’t altered the original and original paper documents should be stored safely.  It’s amazing how often documents can be mislaid!
  • Keep an open mind: often all is not what it seems! Until you have investigated the situation fully you can’t be 100% sure of what has taken place. Don’t jump to conclusions too early in the investigation and make sure you have enough evidence before taking any preliminary action against employees like suspending them.
  • Present the evidence not your opinions: your opinions or assumptions shouldn’t be the feature of your investigation report. The key to your report is presenting the available evidence clearly and summarising it in a balanced manner. 
  • Don’t prejudge decisions:  your investigation is likely to be the first stage in a longer process. Very often a disciplinary hearing will follow the investigation and it’s important you don’t give the employee scope to claim the process was unfair by prejudging the outcome at the investigation stage. Conclusions like “the employee is clearly guilty of fraud and should be dismissed” won’t help your case if they’re made by the investigator before the disciplinary manager has even seen the case!

Nic Elliott leads the Employee Investigation practice at Actons and has been involved in several investigations for organisations in the public and private sector.  Nic’s experience includes running investigations for Derby City Council, a UK contract testing laboratory, a Dutch family service company and a UK retail bank.

You can find more information about our employee investigation practice here, including a short case study of an investigation we ran for a client recently.

Posted on May 11, 2015

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