What happens when an employee is accused of embezzlement?

Embezzlement, the misappropriate or misuse of company funds by an employee, is a serious allegation, and its impact on businesses can be significant, ranging from financial losses to reputational damage.

If an employee is discovered to have embezzled money from your company, you must act swiftly and carefully to protect your interests and ensure you do not land in legal difficulties.

What action should I take?

When embezzlement is discovered, it is important to take immediate action to minimise financial loss and damage to your reputation.

The key steps to take are:

• Investigation – You should launch an internal investigation to obtain the facts, including a review of financial records, interviewing witnesses and speaking to your employment law team, as well as a commercial law specialist.

At an early stage in the investigation process, consideration should be given to suspending any suspected staff to prevent them interfering with an investigation or concealing evidence and to minimise the opportunity for further losses.

• Disciplinary action – After completing your investigations and consulting with HR and your legal advisers, there may be a case for commencing disciplinary proceedings against any staff who appear to have been complicit in any wrongdoing or have not adhered to any fraud prevention policies/procedures. Any disciplinary action should be conducted in accordance with the ACAS Code on Disciplinary & Grievance Procedures and company policies/procedures.
• Reporting – Embezzlement is a crime so, if it is discovered and reasonably confirmed, you should consider reporting it to the relevant authorities. There can be liability for organisations whose managers choose to turn a blind eye.
• Managing potential reputational damage – You might wish to consider whether any additional public relations services are needed.
• Recovery – You may consider taking civil action to recover misused funds and consider whether you have any relevant insurance cover.
• Review – You should review your internal processes and strengthen controls to ensure this does not happen again.

Employers must tread carefully when dealing with allegations of embezzlement.

Accusing an employee without evidence or mishandling the investigation could lead to legal claims including wrongful dismissal, unfair or constructive unfair dismissal, or defamation.

Particular care is needed when there might be a concurrent criminal or regulatory investigation to avoid jeopardising a potential prosecution.

Consulting employment, commercial and even criminal specialists as appropriate at each stage is critical to ensure the correct procedures are followed and the business is protected from further risks.

For more information or to discuss your specific concerns, contact us today.