Employee tips are one of the most effec-tive
means of detecting employee fraud.
HR professionals can keep the lines of
communication open with all staff so
that employees feel comfortable to identi-fy
their concerns to management in a safe
and confidential way. In addition, an em-ployer
should consider a whistleblower
policy to clearly define the channel of dis-closure,
the protection of anonymity for
the reporting employee and the expedi-tious
handling of the disclosure. In a large
organization, a whistleblower hotline –
available to internal employees, external
customers and vendors – can best detect
employee fraud. In a smaller organization,
employee education and reminders to em-ployees
can be equally effective.
WATCH FOR BEHAVIOURAL RED FLAGS
Employers cannot ignore the obvious
signs. It may be an employee living beyond
their salary, taking extravagant vacations
or making large purchases. Conversely,
an employee that never takes a vacation
and resists sharing their duties with oth-ers
may also be a fraud risk. In addition,
HR professionals should monitor an em-ployee’s
unusually close relationships with
a vendor or customer. HR professionals
must take care to watch for the red flags
and investigate, as appropriate.
RECOVERY
If a fraud is detected, care must be taken in
order to maximize recovery. Since appro-priate
and comprehensive investigations
are required, the best advice is to immedi-ately
retain legal counsel and coordinate a
detailed investigation.
HR professionals should take care to
avoid common mistakes in fraud recovery:
■■ Do not notify the employee that the
fraud has been detected. In particular,
do not immediately terminate or sus-pend
the employee. This will allow the
employee time to hide assets or leave
the jurisdiction.
■■ Do not search the employee’s computer,
tablet, smartphone or office phone.
There are significant privacy concerns
regarding searches of computer devices,
and these searches should only be con-ducted
following legal advice and using
appropriate forensic experts who can
maintain the evidence.
■■ Do not notify other employees. The
fraudulent employee is entitled to con-fidentiality
and other employees should
only be interviewed, when necessary,
during the investigation phase.
Secrecy, stealth and speed are the best
weapons available to an employer follow-ing
the discovery of fraud. Recovery is only
realistically available if an employer can get
ahead of the fraudulent employee in the
asset recovery efforts.
Various legal remedies are available to a
defrauded employer to aid in the civil re-covery
of stolen assets:
■■ Anton Piller Orders: These court
orders are often referred to as Civil
Search Warrants. They permit a sur-prise
search of a fraudulent employee’s
home and other locations in order
to find the stolen funds or evidence
that support the employer’s legal case.
The court will only grant these orders
where there is a legitimate fear that
the employee will destroy evidence.
HR professionals can assist by having
information relating to the employee’s
residence and other particulars.
■■ Norwich Pharmacal Order: These
court orders direct financial institu-tions
and other third parties to provide
information necessary to trace assets
of the fraudulent employee, without
feature
notifying the employee that such infor-mation
is being provided. HR profes-sionals
can identify bank accounts of
employees used for payroll to assist in
this type of investigation.
■■ Preservation Orders or Mareva
Injunctions: These court orders freeze
assets, either within the jurisdiction
or worldwide, so that a fraudulent
employee cannot take any steps to
sell, dissipate or otherwise dispose of
assets. This can include land, property,
vehicles, stocks, bank accounts or other
assets.
There is no single solution to manag-ing
the significant risk of employee fraud.
HR professionals need to constantly as-sess
numerous areas to properly prevent,
detect and maximize recovery in cases of
employee fraud. Properly implementing
preventative measures will pay dividends
in the reduced incidence of this problem.
Timely detection of fraud reduces the
quantum of the fraud, and also reinforces
the organizational tone of non-tolerance.
Finally, HR professionals play a key role in
assisting an organization to maximize re-covery
in civil cases. ■
Jordan Deering is partner and national leader
of Dentons Canada’s Fraud, Corruption and
Asset Recovery group.
HRPATODAY.CA ❚ MAY/JUNE 2014 ❚ 29