The Association of Certified Fraud Examiners estimates that, on average, 6% of the turnover of an organisation is lost to employee fraud. Estimates vary as to how much of that is ever recovered, but the consensus is unilaterally in single figures, coincidentally often around 6%. This seems depressingly low, but the fact is that recovery following a fraud can be grindingly slow and often pointless.
Employee fraud will always be a criminal offence, but the involvement of the police is not consistent. It can come down to whether or not they have actually been notified in the first place, as often the shock and embarrassment of the event is enough to suppress the desire to report. However, even where the police are involved, their resources are stretched and they may only get involved in certain cases. Some forces around the country may only deal with easy prosecutions, whilst others will deal with more complex cases, but there is no consistent answer or approach.
A conviction will certainly help a recovery but, whether the police are involved or not, the victim organisation must make an assessment of the cost of pursuing a recovery based on the fact pattern in their particular scenario. There are no distinct differences between the criminal and civil route taken to recover and they run concurrently (with slight overlaps). What is clear is that, by helping the police with the investigative burden, there can be a greater chance of a conviction, which will assist the civil case.
If the fraud scheme has been perpetrated over a long period of time, and 72% last between 1 year and 5 years, then the money may be out of reach.
First amongst the considerations is whether any recover opportunity exists. If the perpetrator has spent the takings on drugs, gambling or other addictions, there will simply be no recovery prospects. Recovery programmes are also slow going and can take 5 years to develop fully, so anyone looking to recover faces the prospect of a potentially long, drawn out and costly process, with no guarantees of success. Additionally, if the fraud scheme has been perpetrated over a long period of time, and 72% last between 1 year and 5 years, then the money may be out of reach. Other factors, such as whether the perpetrator has children under the age of 18, can affect whether a court will approve orders against identifiable assets.
What will always help in the event of discovery of a fraud is early intervention. Every day that action is not taken after discovery, it becomes potentially more difficult to recover. A freezing order will stop further abuse, and claims against the bank can help to reveal destinations accounts. In some cases, the police may simply advise that the matter is a civil one, which limits the options and increases the costs, because police involvement will help share the expense. In one case, involving the theft of over £750,000 of equipment for a project, the police investigation was dropped, no recovery was ever made and all senior employees associated with the project, including the former Operations and Commercial Directors, left to set up their own business.
There is always a lot of emotion involved in employee fraud. It can often lead to redundancies or even put an organisation out of business. Insurance will never remove that emotional trauma but it can help with the financial impact. On payment of the claim, the insured organisation will typically sign a form of release and assignment. As the name suggests, this settles the claim (releasing the insurer from further payment) and assigns the right of recovery to the insurer. It is at that stage that the insurer will make that assessment of the likelihood that any of the money or property taken will be a part of that rather meagre 6%.
