What do you know about workplace fraud?

Fraud in the workplace is a serious offence that can harm businesses financially as well as destroy trust. It involves deliberate deception for financial or personal gain, and while not all fraud is criminally prosecutable, the most severe cases may fall under the Fraud Act 2006. 

The importance of understanding workplace fraud will be elevated from 1 September 2025 as large organisations will be required to implement ‘reasonable prevention procedures’ for fraud or face unlimited fines.

Therefore, now is a good time for HR teams to understand ‘fraud’ and the implications. As a minimum, a policy should be put in place to explain what fraud is, how to spot it and to encourage reporting. This should be linked to whistleblowing and disciplinary policies. 

Fraud is generally listed as an example of gross misconduct in employer disciplinary rules, but we have set out a reminder of the meaning and types of fraud below: 

Types of fraud in the workplace

The Fraud Act outlines three key types of fraud:

1. Fraud by false representation: Providing untrue or misleading information. For example, an employee lying about qualifications to secure a promotion.
2. Fraud by failing to disclose information: Omitting legally required information, such as hiding an unspent criminal conviction during hiring.
3. Fraud by abuse of position: Misusing a position of trust, such as misappropriating company funds or selling confidential data.

While fraud often involves subtle manipulations, employers should be vigilant for all sorts of red flags, such as unexplained discrepancies in financial records, employees living beyond their means, or secretive behaviour.

What steps can employers take? 

1. Preventative measures: Regularly update policies, conduct background checks during recruitment, establish strong internal controls and encourage employees to ‘speak up’ by having effective whistleblowing procedures in place.
2. Act promptly on suspicion: Restrict system access, appoint an investigator, and consider suspension if evidence of fraud emerges.
3. Disciplinary action: Make sure that any disciplinary policy includes fraud as an example of gross misconduct and consider summary dismissal (without notice) if an employee is found, following investigation, to have committed fraud. 
4. Recovery of losses: Fraud is both a civil and criminal offence. If the business has suffered financial loss arising from employee fraud, then employers can involve the police or pursue civil claims, which have a lower burden of proof than criminal cases.

Taking proactive steps to prevent fraud and responding swiftly to allegations can help protect businesses while maintaining a culture of trust and accountability. It is also important to be ready for the new duty to prevent fraud which comes into effect in September 2025. While we trust this article is useful, it is not intended to be legal advice, so please contact us if you need any help with these issues.