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Financial Fraud: What to Do When an Employee Steals From You

 

Financial Fraud: What to Do When an Employee Steals From You

No one wants to believe an employee is stealing from them. After all, we all like to think we’re a pretty good judge of character, right?

But the Association of Certified Fraud Examiners (ACFE) estimates that the typical organization loses 5% of annual revenue to fraud — and once those assets are lost, about 70% are typically unrecoverable.[1] If you do find yourself in this position, know that something can be done. The sooner you act, the better.

Gather Information

First, call a reputable firm that has qualified staff to investigate and determine the actual loss. An investigation will most likely take place on a phased approach, working with your legal counsel and law enforcement. These outside relationships are essential for your protection and the smoothest adjudication of any lawsuits or criminal trials that may result.

If you suspect a current employee of theft, do not notify them. You do not want to reveal your hand and provide them with time to cover their tracks.

If they are no longer with the company, unplug their work computer. Do not shut it down. Shutting down a computer can allow it to cycle through its systems to remove applications or documents that are pending deletion. Try your best to preserve the integrity of the evidence by employing qualified material experts as soon as possible.

Protect Yourself

Once you understand the likely extent of your losses, and have some evidence, talk to your advisors about how to proceed. You’ll need to take corrective action, such as canceling credit cards, changing passwords and restricting account access.

Choose Your Next Steps

You may need to make some tough decisions about whether to file charges or pursue your losses through legal means. Consider the amount of time and money you’ll have to spend against the potential for recovery.

At the same time, consider the message you send by following through. When you stand up to someone who stole from you, it signals to other employees that fraud is not tolerated in your business.

Check your insurance agent to determine what kinds of coverage and provisions you may have in place. You may have a rider, such as dishonest employee or errors and omissions, which can help with your recovery effort.

Make Changes for the Future

Fraud prevention is always better than fraud recovery. Learn from the incident and act quickly to protect your business from future theft. Build a culture that’s resistant to fraud, update your business practices to reduce risk and put internal controls into place.

Provide regular fraud training to employees and management. Employee tips are the number one source of fraud detection, so encourage them to work for you. Talk to your employees about how fraud prevention benefits them and provide a way for them to report suspected fraud.

Conduct a yearly fraud risk assessment to identify potential weaknesses. You might make changes to the way you collect funds, track inventory or report payments and expenses, for example. Certain checks and balances and audit tools, already in your accounting software, can help prevent theft.

Wipfli Can Help

Wipfli has certified fraud examiners, forensic accountants and material analysts to help your organization investigate after fraud has occurred. If you believe an employee is stealing, our team can guide you through next steps.

Wipfli also provides proactive services to protect your organization through comprehensive risk assessments, fraud response planning, internal controls, data analytics, cybersecurity and health information security services. Contact us to learn how you can detect and deter employee theft. 


[1] “Report to the Nations: 2018 Global Study on Occupational Fraud and Abuse,” Association of Certified Fraud Examiners, 2018, https://www.acfe.com/report-to-the-nations/2018/, accessed April 2019.

Author(s)

Michael Kritsmar
Michael Kritsmar, CPA, ABV
Senior Consultant
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