Business owners and organizations may encounter fraud cases yearly because of dishonest business partners and employees. New and small businesses are even more vulnerable to fraud. The risks of companies experiencing fraud are higher because of technological advancements worldwide. The increased awareness of computing systems has made it easier for fraudsters to commit their crimes without physically being present at the business premises. Thus, organizations must integrate internal anti-fraud procedures to fight these activities. In most instances, employees are the culprits of fraud, given their in-depth understanding of the company’s operating systems and access to valuable company information and documents. Therefore, your firm should create multi-level fraud prevention approaches and strategies to reduce such cases.
Although there’s no standard or specific functional approach when you suspect fraud in your company, each instance presents a unique set of complex circumstances and facts. It can be a traumatic experience, especially if the culprit is someone you trust. It can cause you to react negatively toward the company or yourself. So, here are several things you can do when you suspect fraud in your company:
1. Seek Legal Counsel
The first thing you need to do is hire an attorney. The legal counselor will help to guide you through the correct protocol for carrying out the investigation, safeguarding the evidence, and the appropriate legal action you’ll take. Mishandling a fraud case could set your company up for unlawful dismissal, a libel lawsuit, or slander that could restrict your capacity to seek compensation or restitution.
It’s always best to seek help from an expert because they’ll act in the company’s best interest and stay emotionally objective toward the case. An attorney will help expertly gather critical information and documentation that’ll be vital to the findings of your investigations. They’ll also be able to identify the type of fraud offense committed while sidestepping common mistakes and pitfalls. Criminal Law Group explained fraud offences types typically encountered. Employing an attorney is the extra benefit of building an attorney-client privilege should circumstances result in a court case.
2. Communicate With Key Individuals In Your Company
This initiative is essential and is dictated by the embezzlement case at hand. The internal audit department, board members, human resources, and principal management personnel should be aware of the situation as mandated by company procedures and policies. Be cautious and ensure that you only involve individuals who will participate in the investigations and decision-making. Consult with them about when and how the news will be shared with the rest of the stakeholders, including business partners, employees, and the media.
3. Employ A Forensic Accountant
It’s crucial to enlist the help of a skilled and certified person in forensic accounting. Forensic accountants will help you discreetly conduct off- or on-site investigations. They’ll concentrate on the issue through the heaps of data, determine the magnitude, assess and quantify losses, and safeguard the evidence.
Forensic accountants are also skilled interviewers and are experienced in reading verbal and non-verbal cues from suspects during an investigation. Such self-governed professionals save the management from the inquiry’s troubles during a tense, sentimental moment.
4. Gather Information
Gather and document all the necessary information in a format demonstrated in the organization’s policy. Cover what occurred, the time or dates, the people suspected to be involved, where it transpired, the estimated losses, and any other pertinent information.
If you have the authority to access the documents to assist in the investigation, make copies and include them in your report or statements. Don’t make any accusations about anyone or do anything beyond your usual work functions that may warn the fraudster or tamper with the investigation.
5. Keep What You Know Confidential
Refrain from discussing the fraud incident with your associates, coworkers, friends, or even family members. It’s important for your security as well as that of the organization. You may find yourself making an innocent statement that could result in claims of wrong accusations or other allegations. These ignorant statements could also alert suspects or the public that an investigation is happening. Either of these situations can potentially complicate and mess up the matter or, even worse, damage the company’s image.
6. Preserve The Evidence
Securing the gathered evidence is vital during the investigation process. The measures may include safeguarding copies of all computerized backups on the networks and local disks together with the original data, including invoices, bank statements, subsidiary journals, and printed copies of ledgers. Electronic data can be helpful, but, in the end, it’s just an outline of the original documents.
Secure all and any potential evidence, but by every possible means, refrain from examining the evidence on your own. Computerized evidence is very delicate and can be quickly deleted or altered. Things like incorrectly switching off the computer can tamper with the evidence. Ensure all the computers, cell phones, and exterior electronic media like flash drives are taken care of correctly. Preserving the evidence will help the forensic team to determine what happened, who the fraud culprit is, and why they did it.
7. Restrict Access And Place Employees On Leave
With the help of human resource management and legal counsel, placing employees on leave, especially suspects, will help secure the evidence and enable them to be approachable for questioning later during investigations. Although you might want the management to take action immediately to terminate the employment of the suspects, you must wait until enough evidence is gathered to confirm the claims.
It’s also critical that you safeguard all the electronic devices of the employees in the office so that they can’t have access to the gadgets virtually or physically. That’s because some employees may know the password to critical data. You can change all the passwords and cut off access to such information to prevent unapproved accessibility and destruction of evidence. Lastly, restrain employees, particularly the suspect, from entering the office.
8. Take Action
Once you’ve gathered all the information, preserved the evidence, and restricted the suspect from accessing the office, it’s time to take action against the fraudsters to decide on their fate. In the majority of cases, it leads to dismissal. However, if the fraudulent activities are especially catastrophic, you’ll have to resolve the issue in court. You may even learn that their deeds weren’t as evil as reported, and the fraudsters will get away with a warning. On the other hand, be cautious as you do this because you can’t let other employees know that such actions will be condoned.
Many companies are afraid to take action because they’re scared or embarrassed by the potential reaction from the media, public, stakeholders, and clients. However, if action isn’t taken, there’s a possibility that history will repeat itself.
9. Review Your Insurance Policy
Examine your policy to establish if you have liability insurance coverage or any other coverage that would make the company eligible for reimbursement for such unethical activity. The policy would have a closed notification window if the coverage were bought.
You’ll be required to inform your provider that the company has incurred a covered loss. The provider will deny your claim if the company doesn’t access the window for a day. Again, check to verify if the policy offers claims preparation coverage because this compensation can indemnify the company for an expert fee in the investigation.
10. Consider Changing Behaviors And Build Your Resistance To Fraud
As they say, ‘fool me once, shame on you, fool me twice, shame on me.’ Don’t blame yourself for being the victim. Con artists are always very good at their work, targeting successful companies or educated people.
However, you may want to assess the activities or events that led to the fraud. When evaluating the fraud situation, remember that it can’t happen without an opportunity. In most instances, everyday activities in the company can lead to you becoming the target, and repeating those actions could restart the process, making you a victim again. These usual activities may involve commenting on posts on social media, signing up on trading sites, being active in shareholder social media chats or groups, and free giveaways or special offers on the internet and newsletters.
Victims are inclined to be victimized on more than one occasion because these fraud cases are underreported. Repetitive fraud often starts from the victim list sold or available on the dark web. Your company’s vulnerabilities and critical information may be leaked or sold to fraudsters. Staying informed is one of the most remarkable ways for your company to build resistance to fraud. Learn from the situation and establish and implement internal control measures to prevent the same thing from happening again later. You don’t want to have to go through such an event again.
Conclusion
Fraud is awful and can have destructive impacts on your company. Ensure you’re aware of what’s happening in the company at all times, and you should be capable of spotting anything suspicious before it gets out of hand.
One of the best ways to alleviate fraud risks is to enforce external and internal control sources to prevent such cases from occurring in the first place. Should you suspect fraud in your company, the above actions will significantly help.
However, don’t make the mistake of gathering information and evidence without the help of legal counsel and financial forensic experts. Company fraud isn’t entirely preventable, but you can take precautions to prevent it by taking all IT security measures seriously.
