Employees are the main perpetrators of fraud. In 1998, fraud surveys conducted by Ernst & Young and Nottingham University showed that employees committed 84% of detected fraud in commercial organisations. A third of those employees had been with the organisation they defrauded for at least 10 years and half for at least five. Senior management was responsible for 18% of internal fraud and middle management for 52%.

The flouting of well-established accounting practices such as the separation of payments and purchasing functions remains a common source of fraud. The Tai Hing Cotton Mill case was a typical Hong Kong fraud, which was ultimately decided by the Privy Council in London. During the 1970s an accounts clerk called Leung defrauded his employer by incorporating companies with similar names to those of his employer's regular suppliers. He then produced bogus invoices and was able to procure cheques on which he forged his boss's signature in payment of the phoney invoices.

Leung disappeared to Taiwan (whose government almost no country in the world recognises and which accordingly has no extradition agreements) while on bail. He therefore left Tai Hing Cotton Mill and its bankers fighting it out in the Privy Council to decide who should pick up the tab for Leung's fraud. Eventually Tai Hing got its money back, but it took six years of litigation against three major banks.

You might think that modern UK businesses would not be so easily fooled. Wrong. Only recently The Times reported the case of an inhouse accountant who produced bogus invoices just like Leung and went on to use his employer's money to fund an extravagant lifestyle, including his own Formula One racing team.

These examples show just how easy it can be for employees to defraud their employers. But all is not lost. Effective pre-employment screening can significantly reduce the risk. Screening should include a detailed examination of an applicant's qualifications and background, including checking references, credit history and previous directorships. For existing employees being promoted into senior or sensitive positions, an additional level of vetting may be appropriate. This should include checks on lifestyle, credit worthiness and possible conflicts of interest. It is surprising how often financial difficulties or personal problems precede the employee's fraudulent conduct.

An employee who pursues a lifestyle that is out of step with his known income should be treated with suspicion. In the 1970s, there was a case involving Sergeant Tang in the Royal Hong Kong Police. Although only a detective sergeant, he would be driven to work in his privatelyowned, chauffeur-driven car. Tang was later arrested for taking bribes from nightclub owners and others, which ran into thousands of dollars a day. Then in the early 1990s there was Warwick Reid, deputy director of public prosecutions in Hong Kong. Unusually for a civil servant, he used to drive a Cadillac to work and was known to be in financial difficulty over his investments in the Kiwi fruit farm industry back in his native New Zealand. Reid later pleaded guilty to having unexplained assets in excess of HK$12m (approximately £1m) and was sentenced to eight years' imprisonment.

But what if your fraudulent employee does not advertise his expensive lifestyle and you only find out about the Cadillac and the Formula One racing team after the event? Apart from the criminal law, the civil procedure rules (introduced as part of Lord Woolf's reforms) contain a battery of remedies designed to stop fraudsters making off with their ill-gotten gains. Freezing injunctions can be used to prevent an intended defendant from dissipating their assets and so reducing a civil judgement to a worthless piece of paper. There are also seizure orders, which enable a claimant to enter and search premises with a view to seizing documents or property involved in fraud or other wrongdoing.

Most importantly, tracing actions enable an employer to trace the proceeds of fraud even when these have been moved into a bank account in the names of third parties or used to purchase assets. Following an important decision in 1995, it is now clear that a defrauded employer is entitled not only to the proceeds of fraud but also to any increase in the value of assets the fraudster bought with the employer's money. A recent case involving George Blake, a famous spy who escaped to Moscow in the 1960s, makes it clear that income derived from the former employee's misuse of confidential information by, for example, selling their story to the tabloids, may also be seized by the former employer.

But what if your fraudster has skipped the country? What are the chances of employing these remedies against their assets? There are two points to bear in mind. The first is that in civil proceedings your recovery action should be directed at where the money is, not where the fraudster is. In other words, if you are sure that the proceeds of the fraud are in the Channel Islands or some other offshore financial centre, it may not matter that your fraudulent ex-accountant is in South America. Second, even if they are apparently beyond the reach of the courts, they may not in fact be so. There are now extensive international agreements that provide for the enforcement of judgments and orders from the British courts overseas. Most governments now recognise the importance of international cooperation in these matters and have enacted local legislation to effect this. The golden rule is to act quickly when you uncover a suspected fraud and obtain appropriate professional advice.

Patrick Hamlin is a solicitor in Withers' trust and tracing team