Fraud in the workplace is a serious offence that can harm businesses financially and damage trust within teams. 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.
Understanding workplace fraud is about to become all the more imperative for businesses. From 1 September 2025, large organisations will be required to implement ‘reasonable prevention procedures’ for fraud or face unlimited fines. A ‘large organisation’ is defined in section 201 as meeting two or three out of the following criteria:
- more than 250 employees
- more than £36 million turnover
- more than £18 million in total assets
Although the offence of failure to prevent fraud applies only to large organisations, the principles outlined in this guidance represent good practice and may be helpful for smaller organisations.
So now is a good time for HR to get to grips with what ‘fraud’. At the very least, a policy will need to be put in place explaining what fraud is, how to spot it and to encourage reporting. It should be linked to whistleblowing and disciplinary policies.
Fraud is generally listed as an example of gross misconduct in employer disciplinary policies, but it is a term which is not always well understood.
Types of fraud in the workplace
The Fraud Act outlines three key types of fraud:
- Fraud by false representation: Providing untrue or misleading information. For example, an employee lying about qualifications to secure a promotion.
- Fraud by failing to disclose information: Omitting legally required information, such as hiding an unspent criminal conviction during hiring.
- Fraud by abuse of position: Misusing a position of trust, such as embezzling company funds or selling confidential data.
While fraud often involves subtle manipulations, employers should be vigilant for red flags, including unexplained discrepancies in financial records, employees living beyond their means, or secretive behaviour.
What can employers do?
- 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.
- Act promptly on suspicion: Restrict system access, appoint an investigator, and consider suspension if evidence of fraud emerges.
- Take disciplinary action: Make sure that any disciplinary policy includes fraud as an example of gross misconduct and consider summary dismissal if an employee is found, following investigation, to have committed fraud.
- Recovery of losses: Fraud is both a civil and criminal offence. If the business has suffered financial loss as a result of 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 will also be crucially important to place businesses on the front foot in advance of the new duty to prevent fraud which comes into effect in September.
For further information, please contact Kerry Curd in the employment team on 01626 202406 or email KerryCurd@wbw.co.uk.
WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
