Financial Fraud by an Employee in the UAE

Financial fraud is a situation where a person has deprived you of your money through misappropriation or other illegal practices.

Misappropriation is defined as the act of stealing something and using it for one’s own personal gain, usually money. The term misappropriation is also termed “embezzlement”.

There are three most common types of misappropriation are of funds, assets, and trade secrets. 

If an employee has committed misappropriation of funds during the period of his employment, the employer has the following alternatives to take action against such misappropriation.

Criminal Procedures Code - 

The UAE law regards misappropriation of funds by an employee as fraud, which is criminal in nature as the company’s funds are used by the employee for personal gain. Employers can file for criminal proceedings and seek compensation for their losses or damages.

According to Article 22, Federal Law No.35/1992 Concerning the Criminal Procedural Law “Whoever sustained a direct personal prejudice from the crime is entitled to claim from the accused his civil rights during the gathering of evidence, proceeding with the investigation or before the court examining the criminal case, at any stage of trial up to the close of the oral pleadings but he is not entitled to do so before the appellate court. In case the prejudice is sustained by a juristic person, the court must Ipso Jure adjudicate damages if they are specified by law or in a regulation issued under the law.”

 The Dubai Financial Fraud Law-

Dubai Law No. 37 of 2009 relates to Procedures for the Recovery of Illegally obtained Public and Private Funds (The Dubai Financial Fraud Law ). To deter those who commit fraud from refusing to return the proceeds of their crimes Dubai Law No. 37 was passed with the objective of restoring justice to the victims of fraud.

Article 1 gives clear definitions of illegitimate funds and public funds.

Article 2 states that if a final judgment is issued proving that a person obtained illegitimate funds as defined in Article 1 and fails to repay the money for any reason, the enforcement Judge must, upon the request of the debtor (i.e. civil claimant/victim), order the debtor (fraudster) to be imprisoned for:

• For a period of five years if the illegitimate funds obtained are not less than AED500,000 and not more than AED.
• A ten-year term if the illegal monies gained is greater than AED1,000,000 but less than AED5,000,000.
• For a period of 15 years if the unlawful monies gained a total of more than AED5,000,000 but less than AED10,000,000.
• A 20-year period if the illegal monies collected total more than AED10,000,000.  

Article 3  clearly specifies that the duration of imprisonment applicable in Article 2 is equally applicable if the monies are regarded to be public funds, in a progressive step that removes the distinction between public and private businesses that have been created.

Article 4 states that neglecting to refund stolen funds carries a penalty in addition to the punishment for committing the offense that resulted in the illegal cash. 

Labour Law-  

According to Article 44 of the UAE Labour Code, an employer can suspend a worker without any notice if the fault of the employee has resulted in a considerable loss for the employer. 

The UAE law regards misappropriation of funds by an employee as fraud, which is criminal in nature as the company’s funds are used by the employee for personal gain. 

A complaint can be filed to MOHRE  asking for termination. The employer must then get the approval of the Labour Office and the incident has to be reported within 48 hours. 

A written investigation must be done and a warning has to be issued if such an incident is repeated. 

When the dismissal decision is issued in legal form, it is to be shown in the lawsuit and a request has to be made to give it the legal effect.

Thus an employer can register a criminal case and labor case against the employee but the labor proceedings will be on hold once a criminal case is registered. Ultimately when the employer gets a judgment in a criminal case against the employee, the employee will not be entitled to claim any benefits.

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