It's not a topic organisations like talking about, but employee fraud can increase in difficult economic times, and typically it can result from alcohol or drug problems, marital problems or gambling.
Even if you have insurance cover for fraud by employees, you still need to deal with internal investigations, liaising with police and, if customers have been defrauded, dealing with and reimbursing customers. And your insurers still expect you to make an effort at recovery before they pay you.
Sometimes you don't find about fraud until an employee has left. But if they are dismissed for fraud (after getting legal advice), don't write them a reference (yes, it has happened) or pay out superannuation (in case there is an entitlement to hold back for dishonesty). If you have a mortgage to secure a staff loan, you may be entitled to add the stolen amount to the debt. Freeze their deposit account.
If the employee does admit to fraud then the odds are the admitted amount is much less than the actual amount (which from experience is 2 or 3 times more).
If you have evidence of fraud, report it to the police. Don't rely on the police to investigate (they don't have time or resources and they expect you to give them a complete brief). But don't threaten a staff member with police action if they don't pay you back (that's extortion by you).
Do your own investigations to understand how the fraud was committed and whether customers were defrauded. Was a fake customer account created or was money taken from actual customers? Sometimes it's hard to work out.
Where did the money go? Was it gambled away or spent on assets you can recover?
If your internal auditor needs help, talk to a lawyer. We can help with obtaining statements for the police. And there may be a prospect of recovery by civil action by freezing assets early.
For the future, what preventative controls do you have? If staff have suspicions who can they talk to?
You need to be preventative, as well as proactive when a fraud is discovered.