Handling Theft And Embezzlement In A Company

how to handle financial theft business embezzlement at company

As a business owner, you should be wary and constantly vigilant with your business operations to avoid employee theft. Embezzlement describes a white-collar crime that involves misappropriated funds taken from the company’s bank accounts, forged checks, or payroll frauds. This is a serious crime under the state law, where culprits are charged with a felony. It can also be a federal crime with serious penalties, such as fines or jail time. 

This is a common occurrence in various companies, with Fraud Examiners estimating that U.S businesses lose about 7% to employee fraud. As such, business owners should learn how to handle theft and embezzlement done by persons in trusted positions. 

Gather The Facts 

Before accusing an employee of theft or embezzlement, you should have all the supporting facts. Accusing your employee without solid proof will significantly harm the employer-employee relationship and business performance. Fortunately, most employees committing fraud often show telltale signs, such as living way beyond their means, exhibiting an unusually close association with company vendors, or excessive control over. 

You might also notice that the employee suddenly begins working overtime, refuses to take a leave, wants to take work home, petty cash, or office supplies disappears rapidly. If you notice such warning signs, you should consider finding out the underlying reasons. While the evidence might not be clear immediately, gathering some documents such as the books of accounts, canceled checks, and receipt books can provide some leads. You should also sit down with the employee and ask them. During this phase, ask the employee. Don't accuse yet. 

Your next step relies on the employee’s response. During the interviews, watch the individuals' body language and facial expressions. Some employees might have reasonable reasons that justify their actions. However, if the employee admits to theft during the inquiry, you will have solid proof. Surprisingly, most guilty employees admit to embezzlement when questioned. 

Confront With Disciplinary Action 

Once you have confirmed your suspicions, you should proceed with a disciplinary action depending on the seriousness of the embezzlement. This could range from a stern warning for minor theft, asking the employee to compensate, educate the employee about company policies, or documenting the actions in a memo. You can immediately terminate the employee's contract, suspend or send the employee on unpaid leave if the matter is serious. 

Suspending and sending the perpetrator on unpaid leave will provide enough time to assess the extent of the theft and consult with your attorney about the next course of action. These steps should be done with caution, especially if the employee is a member of a union. In such cases, take actions following the union's contractual processes. Don't forget to cut off the employees' access to company systems, financial accounts, and benefits such as fueling cards and cars. 

Launch A Legal Action 

Depending on recommendations from your attorney, you can proceed with legal actions, especially for serious matters, such as complex schemes involving huge amounts. Your lawyer can guide you on conducting investigations, preserving evidence, notifying third parties, and presenting the case in court. Experts in white-collar crimes often cover their tracks, which may necessitate the assistance of forensic investigators who can uncover the entire chain of fraud. 

Serious thefts and embezzlements often lead to a chain of legal impacts. As such, you should navigate various legal minefields, which include; 

Seeking Insurance Claims – this can be beneficial if your company had a crime insurance policy. Your attorney will help you in filing a claim with your insurance company. 

Notifying Third Parties – institutions such as banks and vendors may find themselves at the center of embezzlement. Therefore, you should put them on notice. 

Government Agencies – employee fraud may place your company in jeopardy, such as unpaid taxes embezzled by the employee. With such possibilities, provide notifications to agencies like the IRS to avoid IRS seizures and other actions that can affect your company. 

Lawsuits – attorneys also come in handy if the employee seeks legal redress for defamation or illegal termination. 

Sanction Control And Prevention Measures 

Dealing with embezzlement is one part of the challenge; preventing future theft is the other. Therefore, as you handle the already occurred theft, you should put measures to avoid similar occurrences. Changing internal procedures is an effective method. For instance, accounts should be required to make daily deposits and monthly reconciliations to avoid temptations. You can also separate employees' financial duties, keep track of petty cash, and update systems, such as replacing manual inventory with software. 

Bottom Line On Beating Embezzlement

Without a doubt, embezzlement can be catastrophic for struggling and established businesses. Supporting this is a Hiscox Embezzlement Study that found out that the median cost of employee theft on businesses is $294,000. Be it forged checks, cashing customer checks, or faking vendor payments, you should always be wary. Working with a defense lawyer can help you institute measures to prevent embezzlements, such as signing legal employee handbooks and prosecution of involved parties.

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