Embezzlement – what to do?

The correct way to deal with embezzlement
Internal white-collar crime is constantly increasing. Only if the perpetrators are identified, the causes carefully analysed and the right consequences quickly implemented can a further increase be halted.
Experience has shown that embezzlement is frequently discovered through checks and audits, but often also through specific evidence and in many cases just by coincidence.
  • Returned mail.
  • Unusual increase in new business or extraordinary losses.
  • Incomplete documentation of business transactions.
  • Sudden resignation of an employee.
  • An employee rarely takes a holiday or only for short periods of time.
  • An employee has expensive hobbies or a conspicuously high standard of living.
  • An employee has an unusually intense relationship with customers.
     

1.     The damage is done – a suspect has not yet been identified
 

  • First, make sure that no further damage of this kind can occur.
  • But don't be satisfied with having closed a "security hole". Measures that only prevent the same damage are not enough.
  • Analyse the details of the crime carefully. This alone will very likely enable you to narrow down the field of potential suspects.
  • An undiscovered perpetrator will find new ways to harm your business and can threaten your very existence. You should therefore arrange for a thorough audit.
  • At the same time, in individual cases it may be advisable to have the facts of the case investigated by independent external auditors (accountants, tax consultants, commercial investigation firms). We would be happy to assist you in finding an external auditor.
  • Get the police involved. Investigations by the public prosecutor's office and the Criminal Investigation Department often help to further clarify the facts.
     

2.     The damage is done – there is a suspect or the perpetrator is already known
 

  • Coordinate further steps with your legal department / lawyer.
  • Have the facts of the case clarified by your audit department or other employees you trust who cannot have anything to do with the case.
  • Collect and secure all evidence.
  • Interview suspects and witnesses and record their statements.
  • Keep suspects away from documents to prevent possible concealment.
  • Secure all documents, keys and company IDs belonging to the suspect.
  • Delete or change security codes and passwords.
  • Consider whether it makes sense to temporarily release the suspect from work or transfer him to another job.
  • File a criminal complaint if the suspect cannot be identified or convicted.
  • Check the employment contract to see whether preclusive periods must be observed if you are now asserting claims for damages against the offender.
  • Demand from the offender a written acknowledgement of guilt in which he acknowledges his liability for damages due to intentional unlawful acts for a specified amount.
  • Have the declaration recorded by a notary in a debt instrument with submission of the debtor to immediate enforcement.

     

3.     Secure your claims – as far as legally permissible:
 

  • Offset your claims for compensation against residual wage claims.
  • Check whether embezzled assets can be secured.
  • Have bank deposits, life insurance policies, pensions or other claims against third parties assigned to you, security interests in real estate conceded and motor vehicles transferred to you. You can demand assets of the offender as security up to the permissible garnishable amount.
  • If necessary, seek judicial assistance to secure or seize the assets of the person who caused the damage, e.g. by arrest or injunction.
  • Check recourse claims against third parties who contributed to the damage.
  • Terminate the employment relationship without notice so that further damage can be prevented.
* Note: This checklist contains our recommended preventive measures. However, these are not binding guidelines. You are of course free to proceed differently.