Five Ways Private Investigators Curb Occupational Fraud

By: Lauralee Jeethan

Occupational fraud is a booming criminal industry, and its target business is yours.  

As described by the Association of Certified Fraud Examiners (ACFE), Occupational fraud – also referred to as internal, or workplace fraud – occurs when an employee intentionally misuses, or misappropriates business resources, or assets for personal enrichment. For the 2018 Report to the Nations, the ACFE examined 82 recent Canadian occupational fraud cases, and identified average losses of approximately $250,000 CAD. Of these cases, 52% of businesses did not recover any losses.  

Despite the potential for loss and ensuing damage, fraud risk expert Ivy Walker suggests businesses feel a false sense of security based on confidence in procedural, and hiring decisions. The reality is comfortable, trusted, longstanding employees are most likely to commit fraud against employers. 

However you feel about your personal circumstance, objective strategies are essential to minimize occupational fraud risk, and maximize safeguards. Just as modern businesses depend on experts to develop marketing plans, find office space, or service equipment, top decision-makers greatly benefit from connecting with anti-fraud professionals to prevent, investigate, and mitigate occurrences. 

Before your next audit, consider these five ways private investigation agencies can assist your company combat occupational fraud. 

Build An Expert Team

Modern private investigators possess professional experience in diverse specialized areas such as: accounting, certified fraud examination, human resources, law, public safety, and research. While private investigators can certainly commence, or join an investigation after a business detects fraud, as suggested in Expert Fraud Investigation: A step-by-step guide, a full service investigation agency – like Haywood Hunt & Associates Inc. (https://www.haywoodhunt.ca) – can efficiently assess an occupational fraud case from beginning to end. This includes identifying financial irregularities, as well as conducting additional investigation to determine methods or parties involved; pinpoint operational problems; strengthen anti-fraud controls; locate or recover assets; and pursue litigation. 

By working with fewer points of contact for an investigation, companies are able to keep tight continuity on fraud inquiries, as well as save time and money. 

Boost Anti-Fraud Tactics

Depending on the size of a business, the ACFE indicates the average internal fraud occurs for 12 to 24 months before detection. Moreover, according to fraud prevention expert Dominic Peltier-Rivest, businesses operating with less than 100 employees are vulnerable to greater losses. 

The ACFE determines fraud perpetrators find opportunities to exploit inconsistent, or weak operational controls such as insufficient monitoring, auditing, and duty segregation. Under these circumstances, occupational fraudsters abuse their knowledge of departmental procedures and shortcomings to avoid detection. 

To establish appropriate internal controls, private investigators examine existing workplace procedures to identify individual vulnerable areas. Whether implementing new or improved initiatives such as a tip hotline – which can decrease losses by 15% – private investigators can help strengthen methods to monitor operations for anomalies; evaluate tip credibility; and make full use of anti-fraud software(s). 

Offer An Objective Perspective 

The ACFE’s occupational fraud and abuse survey concludes approximately 87% of culprits had at least one behavioural red flag on record. Red flags such as personal financial issues, curious employee relationships, or mysterious growth in prosperity are common indicators of potential, or active occupational fraud. 

Through pre-employment screening and due diligence investigations, private investigators can help businesses get ahead of occupational fraud risk. Two areas of investigation include verifying candidate resume claims, and performing full background checks on potential high impact employees like financial officers. At a client’s request, private investigators can also present recommendations based on information gathered to help inform next steps. 

Perform Extensive Investigations

Private investigators have a wide variety of investigation techniques at their disposal. Whether a custodian is suspected of skimming transactions, or a high-level officer is connected to a series of suspicious invoices – as described in Fraud Casebook: Lessons from the Bad Side of Business – private investigators can evaluate the validity of a client’s investigation objective, and establish an appropriate plan of action based on individual needs, and industry.

Private investigators looking at overt fraudsters – like our aforementioned custodian – may install a camera system to monitor an area where inexplicable loss is apparent. 

Top-level violations such as financial statement fraud, or corruption might require a more in depth approach. In this case a private investigator might use open-source intelligence research to look for evidence of top-earners spending beyond his or her means. Additional methods include interviewing connected parties to verify facts, and locating assets to make sense of questionable transactions. 

As technology evolves, there is also increasing concern with intellectual property theft, and non-compete contract violation. After thorough investigation with regard to individual and privacy laws, private investigators can – in some cases – obtain a warrant to recover evidence in danger of destruction, or a client’s stolen assets. Such a warrant is executed by local law enforcement, but private investigators are permitted to go along for the ride. 

Make Excellent Witnesses

To obtain a private investigator license in the province of Ontario, candidates must demonstrate exceptional verbal, and written communication skills. Regardless of the task, private investigators present clients with sound case files including detailed reports of all actions taken on the client’s behalf; resources consulted; evidence; recommendations; and an affidavit of service. Whether a business chooses to pursue litigation, or handle occupational fraud occurrences in a different manner, a private investigator’s case file serves as a credible and respected source of information across the board. 

Resources:

Association of Certified Fraud Examiners. (2018). Report to the Nations: Canada Edition. ACFE. Retrieved from https://www.acfe.com/uploadedFiles/ACFE_Website/Content/rttn/2018/RTTN-Canada-Edition.pdf

Association of Certified Fraud Examiners. (2018). Report to the Nations: 2018 global study on occupational fraud and abuse. ACFE. Retrieved from https://s3-us-west-2.amazonaws.com/acfepublic/2018-report-to-the-nations.pdf

Coenen, T. L. (2009). Expert Fraud Investigation: A step-by-step guide. Hoboken, NJ: John Wiley & Sons, Inc. 

Peltier‐Rivest, D. (2009). An analysis of the victims of occupational fraud: A Canadian perspective. Journal of Financial Crime, 16(1), pp.60-66.

Walker, I. (2018, December). Your Employees Are Probably Stealing From You. Here Are Five Ways To Put An End To ItForbes.com. Retrieved from https://www.forbes.com/sites/ivywalker/2018/12/28/your-employees-are-probably-stealing-from-you-here-are-five-ways-to-put-an-end-to-it/

Wells, J. T. (2007). Fraud Casebook: Lessons from the bad side of business. Hoboken, NJ: John Wiley & Sons, Inc. p. 305, 425

Published by sherstu

Recipient of the 2019 Haywood Hunt & Associates Inc. post-secondary scholarship.

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