Fraud Investigation

When someone embezzles at your organization, you lose twice. Not only have you lost financially, but you have also lost emotionally; you have suffered the loss of trust. To keep from losing a third time, it is imperative organizations seek specialized expertise, such as that provided by Certified Fraud Examiners. Embezzlement is a complex matter and the rights and responsibilities of both the employer and employee must be observed. Federal and state laws, in many cases, can put an employer at risk if the rights of the employee are violated. In addition, Certified Fraud Examiners can assist the organization in taking steps to prevent future instances of embezzlement. The following are important steps you organization should consider if you suspect embezzlement:

• Contact Your Legal Counsel and Certified Fraud Examiner. This is not the time for self-diagnosis. Embezzlement is a complex matter. Contact someone who is competent is this area and has experience in dealing with embezzlement.
• Contact Your Insurer. Failure to put the insurer on notice of a potential loss can void fidelity or employee theft coverage. Deal with the Suspect. Many times management will want to terminate immediately. However, depending upon the circumstances, the best course may be to get an investigation underway and discover evidence of sufficient predication before termination. In addition, under common law, employees have a duty to cooperate with employers in a legitimate investigation.
• Know the employer’s and employee’s rights and responsibilities. Employers have a right to conduct a fraud investigation, but the actions taken by the employer must be within Federal and state statutes and consistently applied to all employees. Employees have a duty to cooperate with employers in a legitimate investigation. Also, employees may have certain rights to privacy and rights under the Fair Credit Reporting Act, among others.
• Prepare a plan. Fraud investigation can be a complex undertaking. A plan can help ensure important steps are not overlooked. The timing and order of document examination and conducting interview can be crucial.
• Act quickly. Most likely the scheme has been going on for sometime and possible losses are usually more than first suspected. The employer must act quickly to stop the damage.
• Secure Data. The organization must take immediate action to preserve data. The issue of intent is at the heart of proving fraud and is based, primarily on circumstantial evidence. Data to be secured would include anything the employee touched while at the organization. This would include all documents, in both paper and electronic formats.
• Where there is smoke, there are mirrors. Studies have shown where fraud is occurring in an organization, there is a very good chance other personnel have developed their own schemes.
• Remember the Titanic. Fraud is very much like an iceberg; only a small part is visible. Suspects rarely admit to the total amount involved in a fraud, unless confronted by the facts. Many times, they are shocked to find out the total amount involved. In addition, others may be involved in the fraud scheme.