Allegations of Fraud: Work Fast! The First 48 Hours Are Crucial!

Did you know that when your company finds itself the victim of fraud, the measures implemented within the first 48 hours are essential in properly managing the crisis?

Let’s say that you are the president of a company and an employee informs you that a highly respected, long-time colleague is alleged to have been committing fraud. You are convinced that the organization has adequate risk management mechanisms and internal control procedures regarding fraud. You understand that you must act swiftly and discreetly. But where should you start to minimize the repercussions of fraud and optimize the results of an investigation?

Two pitfalls to be avoided

1-Do not meet with the suspect too soon

This will prevent the suspect from destroying evidence before the investigator can get hold of it. It will also give the investigator more time to gather as much evidence as possible to confront the suspect during the interview.

2-Do not search the suspect’s files and emails prematurely

Emails, text messages and files in the suspect’s computer and smart phone can provide invaluable evidence and it can be extremely useful to review this evidence. However, a search of this kind can have catastrophic consequences if not conducted in accordance with proper procedures, i.e., while respecting an employee’s reasonable right to privacy.

Measures to Take… Quickly

1-Assess the allegations

First, we suggest that you discreetly conduct a preliminary analysis of the allegations to make sure they are credible and determine whether an investigation is required. At the very least, you should meet with the whistleblower to fully grasp the allegations and, if applicable, review the evidence.

2-Identify potential accomplices and inform other organizational stakeholders

If the allegations appear to be serious and founded, the next step is to identify any potential accomplices within (and outside) the company. This analysis is absolutely crucial to avoid discussing the allegations with the fraudster’s potential accomplices. You must then determine who you intend to work with within the organization to develop your action plan. The number of people who are informed of the situation should be kept to a minimum to ensure confidentiality.

3-Create a multidisciplinary response team

To manage such a crisis, setting up a multidisciplinary response team is essential and often requires mobilizing resources from outside the organization. The team should include experts in forensic accounting (investigations) and labour law.

4-Protect the company’s assets and the evidence

The response team should determine what action should be taken, in particular by ensuring that the alleged fraudulent activities stop so as to protect the company’s assets and the documentary evidence.

Of course, the points noted above only cover the first steps of the process for managing a fraud crisis, but they are critical to ensure a successful investigation. One must keep in mind that unfortunately fraud can happen in all companies.

This article was originally published in Action Canada-France magazine.