Financial distress – in one form or another – is a real issue for many households as the cost of living crisis deepens. On 16 October 2025 [1] the BBC reported that economic growth remains “sluggish” and “the UK would face the highest rate of inflation among G7 nations both this year and next, as result of rising energy and utility bills”.
In the current economic climate, employees may be facing a number of challenges, including:
- Reduced hours.
- Reduced income.
- Increased pressure on their earnings, being spread more thinly making it difficult to build any ‘nest egg’ for unforeseen financial events.
- Difficulty in accessing and/or repaying financial relief, such as bank overdrafts or loans.
As a result, ‘need’ for more money can arise. In this financially vulnerable state, those employees who have the opportunity to access to their employer’s cash and financial systems are far more likely to give in to temptation. This is where need and opportunity come together.
Experience shows that the majority of employees who commit fraud against their employer are in some way directly connected to all, or part of, the financial processing of the business. Surprisingly often, they are trusted explicitly by their employer and, sadly, some of these employees will have held their roles without any abuse of position for years prior.
The fraud is likely to be simple; paying fake invoices to themselves, over claiming of expenses or taking ‘back handers’ from contractors and suppliers who may also be anxious to retain your business.
How can you protect your business?
If you tackle the root causes of employee fraud, you have a greater chance of preventing it. This is likely to be a significant challenge for many employers, particularly during periods of economic strain, when so many factors which will influence need and opportunity are outside of their control.
Reducing need
- Know your employees – this can help identify those who may have a desire or need to commit fraud. Keep open lines of communication and try to understand what current pressure they might be experiencing in their household. Understand what challenges they face and seek to learn if there is anything you might be able to do as a business to help them overcome these.
- Maintain open lines of communication – this plays a vital role in empowering your employees to talk about their worries and personal stresses.
- Empower your team’s voice – make sure every member of your team is able to talk to their line managers, or business owners. If your employees feel like you will listen and try to help, they will be more inclined speak up.
- Keep your team updated – as much as you can, share information with your employees about how the business is doing, especially if this will create a feeling of job security. If your team understand you have identified the issues you will face and that you have a plan in place for long term business sustainability, then those employees who might otherwise be feeling hopeless, might be able to see the light at the end of the tunnel. If they believe things will get better, then the need and desire to procure money through fraud will be reduced. Put simply, your employees need to know things will be okay.
- Communications from professional advisors – The most common professional advisor for many businesses are the company accountants. As anxiety increases when government budgets are announced, share information your professional advisors give about the impact on the business and mitigating it. Many accounting firms release short post-budget analysis which can be shared with employees with a synopsis of ‘what this means for us’. Showing that your business has a handle on change and is approaching the future with positivity in the face of challenges can ease anxiety and reduce people’s need to take drastic steps (which often begin as an intended short term fix).
Reducing opportunity
- Payments – make payments via BACS to known bank accounts for suppliers to avoid the risk of fake invoices to illegitimate accounts and reduce the needs for expenses claims.
- Put checks and measures in place, even for trusted and long-standing employees – use peer reviews and audits to check the integrity of transactions. Undertake some analysis from time to time to check for an increase in number of suppliers, a rise in expenses claims or any unusual patterns, such as sudden escalation in the use or costs of a particular supplier.
- Know your suppliers – undertake due diligence before engaging with suppliers to check the business credentials and see if there are any undeclared connections to employees. It is also important to be familiar with their invoices and pricing structure and to double check invoices in support of expenses directly with suppliers to ensure the correct name and payment details appear. Spot check the amount claimed on an invoice directly with the supplier from time to time.
- Lean on your professional advisors – Your independent company accountant is likely to know your business well and understand how it operates. Consider speaking to them about services they might offer for one-off auditing and ‘health checks’ on both supply chains and financial transaction chains.
What should you do if you discover employee fraud?
- Investigation – at an early stage you will need to decide whether to investigate without tipping off the employee or to isolate the employee, which may mean suspending them. Try to avoid dismissing them immediately as if they remain an employee you will be able to maintain control of a process of interviews and meetings.
- Preserve evidence – ensure you preserve any evidence, especially computer hardware and email evidence by taking an image of the employee’s computer or laptop.
- Use professionals as soon as possible – consult external accountants and auditors, IT experts and/or lawyers. If you have fidelity insurance, your insurers may appoint an insurance panel solicitor to help you. Confidentiality is important in terms of your communications in relation to the investigation. Solicitors can bring privilege to your communications.
- Take legal advice on both HR and recovery strategies – getting early decisions wrong can be costly.
- Gather details of all known or suspected bank accounts used by the employee – this might help with tracing.
- Consider which third parties may have been involved, if any.
- Consider instructing a tracing agent (via solicitors or accountants) to obtain an asset report – whether the employee has any assets will help drive the recovery strategy.
- Decide your priorities – recovery or punishment – this helps set a strategy of whether you make a complaint to the police or seek recovery via the civil court (or a combination of the two). You should also consider how the event coming into the public domain could affect your business.
- Check whether you have any insurance policies which might cover the losses. These may include Fidelity Insurance or Director’s in Office Insurance. If you have broker be sure to speak to them. There can be very short time limits to inform insurers of a potential claim.
How can we help?
Should you suspect Employee fraud, please do not hesitate to get in touch. Our team can offer professional legal advice and help you gather evidence to support your case and provide the vital legal support you need. To discuss your circumstances and learn more about how we can help please contact the author Liane Atcheson.
Liane Atcheson, Head of Disputes and specialist fraud and litigation solicitor, helps individuals and businesses prevent, detect, and respond to fraud and dishonesty. Her deep legal insight and analytical approach enable clients to assess evidence clearly and make informed decisions. Liane combines a results-driven mindset with empathy and sensitivity, essential qualities in complex fraud matters.
We hope this article has provided valuable insights and information around employee fraud. Tenet is a Fraud Law Firm with an experienced team of specialist fraud and financial crime lawyers, who are dedicated to providing up to date and engaging content on disputes and compliance law relating to fraud and financial crime from a legal perspective.
If you have any specific topics or interests that you would like to see covered in future articles or would like to contribute your own perspectives to our Tenet Fraud Hub, please reach out to Paula Crowther.
