Mistakes or something else?
When we talk investigations, particularly potential financial wrong-doing, we enter a grey area. Projects don’t necessarily begin with a C-Suite request to investigate financial crime allegations. And of course, people don’t announce their ethical or criminal lapses.
Instead, many cases of individual employee fraud or general corporate malfeasance are discovered as part of something else. Often, it is as part of a larger effort at improving efficiency or sorting out an administrative problem or operational red flag.
In other words, they don’t begin with formal investigations of financial crimes at all. It might be situations like these:
“Sales are up, yet we are still losing money.”
“Vendor invoices seem to be growing Y-O-Y, and even Q-O-Q, but sales and inventory aren’t.“
“We are hearing a lot of informal complaints about recent compliance initiatives and how they are bad for business.”
“The sales team is a world onto themselves with little oversight.“
In addition, financial loss is only one of the risks created by financial crimes. Depending on your jurisdiction, there can be financial, regulatory, or even legal consequences to knowingly ignoring financial crimes or failing to take reasonable steps to identify or prevent their occurrence.
The US Department of Justice long ago provided guidance to United States attorneys to the effect that what a company does to address the risk of financial crime matters.
However, being too aggressive can also be a problem. Fishing expeditions to troll for potential problems are fraught with legal risks. There should be a justifiable basis for investigation.
It is also vital to carefully select who will do the investigating. Utilizing a consulting firm where individuals are trained in fraud related issues and identifiers is a must.
Below are some key issues to consider when it comes to professional service firms that deal in these investigations.
Is the engagement staffed by Certified Fraud Examiners?
Do they have forensic experience around technology? – such as evidence preservation controls and documented procedures for chain of custody.
Do they understand the legal ramifications of an investigation?
What about best practices around oversight responsibility and discovery?
Who will they involve on their team and what is each person’s basis for involvement?
How will the case be built? There should be an investigative framework here to drive things. An approach that will stand up to scrutiny and reduce the risk of biases and lack of uniformity in analysis.
Wrong-doing should not be ignored, and as mentioned above, in some cases it can not legally be ignored by company leadership. But remember, care must be taken in how the investigation is launched, led, and concluded.
Working with a firm that understands this is paramount to success – particularly if the matter ends up in court as is sometimes the case. Contact us to discuss further.