5 Tips for Handling Internal Fraud Without Poisoning the Workplace

by Chris Rhatigan on Aug 24, 2016 8:00:00 AM

How to handle workplace fraudOne of the most difficult challenges a manager will face is when an employee is suspected of stealing from the company. Investigations must be conducted with confidentiality in mind, but at the same time, those hurting the company must be stopped.

Whether it’s embezzlement, fraud, or theft of intellectual/physical property, most businesses will experience employee theft at some point. In fact, the Association of Certified Fraud Examiners estimates that 5% of revenues worldwide are lost to fraud. Here’s how to deal with the issue without dragging down morale.

01. Prepare

There will always be some workplace fraud that cannot be prevented. However, by being consistently diligent and careful with the maintenance of accounts and finances, you can limit your fraud exposure. For example, don’t keep much petty cash around and close any slush funds that are easy targets. Also, make sure that your employee handbook outlines how the business will respond to fraud complaints.

02. Investigate

Workplace fraud is difficult to investigate for a number of reasons. Make sure that you do so as discreetly and confidentially as possible. You will need to determine if you want to investigate the crime in-house using the HR department or if you want to hire an unbiased third party. Typically, the larger the crime the more necessary it is to bring in experts.

In any case, having an honest conversation with an attorney or fraud expert before proceeding is always a good idea. Then it’s time to collect evidence and determine if stealing did occur. If you need to interview anyone associated with the case, make sure that they understand that what you discuss is confidential.

Arkus, Inc., a private investigation firm, say that it’s tough to uncover wrongdoing while not harming relationships with innocent employees or damaging anyone’s reputation. The investigation process requires analytical skills and knowledge of legal implications.

Workplace fraud

03. Discuss

Once you’ve determined that there’s been a crime, call the employee into your office to have a conversation. Get right to the point — show them the evidence that you’ve collected. It’s going to be an uncomfortable conversation, but it’s a necessary one.


04. Terminate

In the vast majority of situations, you will need to terminate employment. You will want a security guard or other professional present to escort the employee from the building.

You should discuss with legal counsel or fraud experts about whether to press charges. Most of the time, businesses choose not to press charges unless the damage to the company is substantial. There are also instances when employers choose not to terminate employment, such as when small office supply items have been stolen. Even in these cases, employers should take action of some kind to ensure that a culture of fraud doesn’t blossom.

05. Communicate

You will want to tell your employees about the situation to quell any office gossip. However, you can only give them the broad outline of what has transpired. If you begin supplying details or mention any of the employees involved, you’re liable to be sued for defamation.

Your company will most likely deal with workplace fraud. But by taking deliberate steps, your organization will weather the storm.



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This post was written by Chris Rhatigan

Chris Rhatigan is a freelance writer and editor. He is a former newspaper reporter for The New Haven Register and The Iowa City Press-Citizen. He enjoys playing old video games, studying (and trying to speak) Hindi, and walking his dog on the local trails. He lives in India.