What Is Employee Fraud?

Definition

Employee fraud is the intentional misuse of an employer's assets, resources, or information by an employee for personal gain or to cause harm to the organisation. It is a form of occupational fraud - financial crime committed by a person in a position of trust against the organisation that employs them.

The Legal Framework

Fraud Act 2006

The primary legislation covering employee fraud in England and Wales. Key offences include:

• Fraud by false representation (s2) - making false statements to obtain a financial advantage
• Fraud by abuse of position (s4) - exploiting a position of trust (e.g. a bookkeeper stealing funds)
• Fraud by failing to disclose (s3) - concealing information that creates financial gain

Theft Act 1968

• Theft (s1) - dishonest appropriation of property
• False accounting (s17) - falsifying financial records
• False statements by company directors (s19)

Bribery Act 2010

Employee bribery - receiving or giving improper payments or benefits from/to third parties.

Economic Crime and Corporate Transparency Act 2023 - Failure to Prevent Fraud

In force from 1 September 2025, this offence makes large organisations liable if they fail to prevent employees from committing fraud offences for the organisation's benefit, facing potentially unlimited fines if convicted. Read our FTPF guide →

The ACFE Fraud Triangle

The three conditions that enable employee fraud:

1. Opportunity - access to assets and weak controls
2. Pressure - financial stress, lifestyle demands
3. Rationalisation - convincing themselves it is justified

How Long Does Employee Fraud Go Undetected?

Employee fraud typically goes undetected for extended periods - perpetrators exploit gaps in management oversight, manipulate data and financial records to hide activity, initially committing fraud at irregular intervals and for smaller amounts that increase over time.

Civil vs Criminal Proceedings

Civil proceedings: employer brings a claim to recover losses - typically through the High Court, using freezing injunctions, asset tracing, and civil fraud claims.

Criminal proceedings: police and CPS/SFO prosecution of the employee - resulting in conviction and potential confiscation under POCA.

Both can proceed simultaneously. Expert witnesses may be needed in both contexts. View case types →

CPR Part 35 & Expert Duties

An employee fraud expert witness owes their primary duty to the court under CPR Part 35 - not to the employer or solicitor who instructed them. This independence is particularly important in fraud cases, where the expert's objectivity determines whether their findings are credible to a court. The duties were established in The Ikarian Reefer [1993] and require the expert to provide independent, objective evidence regardless of who pays their fees. View expert qualifications →