About this series Doing business in Thailand means occasionally encountering situations that would simply never happen in Japan. This series looks at common legal trouble patterns for Japanese SMEs — written as a readable column, not a legal textbook.
Monday morning. The accounting staff member’s desk was empty. By early afternoon, a call came in from the external accountant: “There are a few things I wanted to check with you — some of the account movements look a little unusual.” — What if that “little unusual” turned out to be three years of embezzlement?
When Trust Becomes a Blind Spot
Japanese companies running smaller operations in Thailand often have no choice but to delegate significant responsibilities to local accounting and finance staff. Head office in Japan can’t review every line item — trust in the local team becomes the operating assumption.
That trust, unfortunately, can create the conditions for internal fraud.
This isn’t unique to Thailand — embezzlement tends to occur when opportunity, motivation, and rationalization all align. In overseas operations where Japanese head office oversight is limited, the “opportunity” element is often structurally present.
Common Fraud Patterns
① Fictitious expenses and fake invoices
Payments to vendors that don’t exist, or invoices processed at inflated amounts. When the person approving expenses and the person processing payments are essentially the same — or closely connected — detection is slow.
② Cash skimming
In retail, food service, and service businesses, cash taken before it reaches the register or the record. When POS system data and actual deposits aren’t regularly reconciled, this can go unnoticed for a long time.
③ Payroll manipulation
Wages continuing to be processed for employees who have already left — “ghost employees” — or social security contributions being miscalculated for personal benefit. In small operations where HR and accounting are handled by the same person, checks and balances can break down.
④ Kickbacks from vendors
Collusion with suppliers — inflated invoices or fictitious orders in exchange for personal kickbacks. At the individual employee level, this is difficult to detect and can persist for years.
How It Typically Surfaces
One of the most common discovery triggers is a sudden resignation or extended absence by the responsible employee. While they’re present, they control the records. When a replacement or external party reviews the books, irregularities become visible for the first time.
External audits, accountant reviews, and tax investigations are also common discovery points. Years of carefully managed fraud can unravel in a single external review.
What to Do When Fraud Is Discovered
① Preserve evidence first
Before confronting the employee, secure physical and digital records — ledgers, bank statements, receipts, email correspondence. Moving too quickly to confront without evidence creates a risk of evidence destruction.
② Understand the legal options
In Thailand, embezzlement and fraud can be pursued as criminal offenses under the Criminal Code. Civil damages claims can proceed alongside or instead of criminal action. Which path makes sense depends on the strength of evidence, the amount involved, and realistic recovery prospects.
③ Handle termination carefully
Immediate dismissal for cause — including fraud — may be possible in some circumstances, but procedural errors can create exposure for wrongful termination claims. Confirming the proper process before acting is worth the time.
Prevention Is the Real Answer
Internal fraud is rarely something you can fully recover from once it has gone on for years. Prevention is where the real leverage is:
- Separation of duties — keep the person who authorizes payments different from the person who processes them
- Regular external review — even annual external accountant reviews provide meaningful deterrence
- Unannounced cash counts
- Internal reporting channels
Simply having a Japanese head office manager review monthly reports can meaningfully reduce the opportunity for fraud.
Next time — the final installment: the work permit and visa mismatch that nobody noticed until it was too late.
For questions about internal controls, fraud response, or related Thai employment law matters, please feel free to contact us.
This article is for general informational purposes about Thailand’s legal system and does not constitute legal advice under Thai law. For specific matters, please consult a Thai-qualified legal professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.