I actually had this happen. I was working with a partner and we were providing services as vendors for a company. I discovered he had been misallocating hundreds of thousands each year and confronted him. He was arrogant and said he didn't think the company would mind as long as we kept delivering what they wanted. I stopped working with him, (You're known by the company you keep - literally), and ultimately ended up helping the company that had hired us get back their assets and avoid a costly lawsuit. Your reputation and peace of mind shouldn't have a price... it was difficult to go through, but it was the right thing to do. I also alerted the IRS as well. You only have to ask how you would want an insider to respond if someone were defrauding you.
It would depend on whether it was being done intentionally or not.
If one of my employees were intentionally defrauding my company or my clients, to line their pockets, I would show no mercy.
First, I hope I wouldn't be associated with people engaging in fraud or a company in general with fraudulent practices. The position I take is very simple. While I expect my credit card companies to protect me against fraudulent transactions (regardless of the amount I am defrauded by), it is hypocritical that I wouldn't expect the same out of an associate, my company, vendor, client and myself. Then of course there is the ethical behavior that I prefer to avoid these situations at any cost.
Now the issue about pointing out the fraud is less important than how we do it. I would seek counsel on how best to approach it through some legal advice and then articulate it in a constructive and collaborative manner.
Yes, there is the whistleblower's law and all that Jazz, however, the process is also important and so I would find the resources and show them the way. Whether it affects my clients, accounts, team etc, I am finding a fast way to bolt out of that enterprise. Rarely does a company engage in fraud without it's people being aware of it. It does take people to fraud and not a machine.
Fraudulent behavior is also reflected in other areas of the work culture and doesn't just isolates itself to financial or other exclusive transactions. The people committing fraud in general would have a pattern of undesirable behavior in how they hold up to the mission and vision of the company.
I was recently approached on one of the professional media to engage in fraudulent practice to make him some money as well as myself. I politely shared my one liner of no interest further and knew I need to run virtual miles away from him. Amazing how people can take others for granted.
Hope this helps you in your decisions on fraudulent activity and how to address it.
I worked for a company years ago that wanted to do something completely unethical in my area of purview. I quit. My integrity was at stake. If you know something unlawful is going on and take no action, you could be considered an accomplice.
A big, "IF"
then, stop it instantly, pull up the folks involved, make them own it, inform all affected & clean up by putting the check & balances in place for it not to repeat...