Source: The Law Society Joint guidance from the National Crime Agency, Action Fraud, the National…
PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
In many organisations, employees have to be trusted to handle money or the business would simply grind to a halt. However, one case in which a company director made unauthorised transfers totalling about £1.8 million illustrates the importance of having sensible safeguards in place.
The man, an accountant, worked for an investment management company as a compliance officer and was an authorised signatory in respect of its bank accounts. Payments in excess of £5,000 required two signatures. However, over a period of more than two years, he forged the signature of one of the directors in order to transfer money to three recipients, two of them overseas. The fraud was detected by the company’s auditors after the man was appointed as a director.
The man claimed that he had himself fallen victim to an investment ‘scam’ and had lost almost everything he owned. He described his misuse of the company’s money in an attempt to bail himself out as an error of judgment and the biggest mistake of his life.
With a view to securing repatriation of sums which had been sent overseas and recovering its money, the company obtained an injunction against him which required him, amongst other things, to give full disclosure of his assets. He had revealed such information in dribs and drabs but the company claimed that the picture of his financial position was far from complete. In those circumstances it launched contempt of court proceedings against him.
The High Court had grave reservations about his evidence and found that he had lied when he claimed not to have a beneficial interest in certain properties. However, it found that it had not otherwise been proved that he had failed to disclose his assets. It had also not been established that he knew where the missing money was or that he had failed to cooperate with the company’s attempts at repatriation. There would be a further hearing at which the man would be sentenced for the acts of contempt which had been found proved.
Says Wendy Davidson, “Prevention is always better than cure. The impact of employee fraud can be devastating for both a business’s finances and its reputation.”