7 Fraud Investigation Preparation Tips: Part 1

You can’t just kick down the doors and get to work. You need to plan out your strategy carefully in order to protect everyone involved in the investigation.

Posted by Joe Gerard in Ethics & Compliance, Fraud, Human Resources on March 22nd, 2011

A fraud investigation requires a certain amount of planning before you can spring into action. As a manager, investigator or HR professional, you need to know how to handle allegation information to avoid letting your emotions take over and acting on impulse. I’ve been reading the book “Anatomy of a Fraud Investigation” by Stephen Pedneault, which raises a ton of interesting points about what really goes on when preparing for a fraud investigation. You can’t just kick down the doors and get to work. You need to plan out your strategy carefully in order to protect everyone involved in the investigation.

Pedneault uses an example of a fraud investigation where an employee at a company brought information forward about potential fraudulent activity conducted by another employee, but wished to remain anonymous. The employee was able to provide management with a copy of a credit card statement that listed some of the personal expenses that the other employee had been charging to the company credit card. The employee being reported had no knowledge that anyone had any idea of his actions.

Fraud Investigation Preparation

Here are some of Pedneault’s recommendations and issues to consider once you’ve been made aware of the possibility of fraudulent activity:

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1. Timing:

Pedneault suggests that you shouldn’t just “wait until tomorrow” when it comes to gathering evidence.
Pedneault mentions that timing is everything. You have to ask about whether or not the subject of the investigation is aware of the fact that anyone has caught onto their scheme. If there’s reason for the subject to believe that someone is on to them, you can be assured that they’ve probably already destroyed any evidence that goes against them. Pedneault suggests that you shouldn’t just “wait until tomorrow” when it comes to gathering evidence.

2. Round up the troops for a strategy meeting:

Figure out who needs to be involved- legal counsel, HR, outside investigators, etc. and notify them right away. Involve your company’s lawyers to provide you with legal advice along the way. Involving HR helps with access to company policies and any employee information that may be needed throughout the investigation. Having someone from HR on board can help with understanding office procedures and placing involved parties on paid leave if necessary. This team should meet as soon as possible to explore options and discuss how they will move forward with the investigation, as each one differs based on the goals, circumstances and people involved.

3. Review laws, policies and other documents:

Have HR give the team with copies of the company policy, employee handbook, code of conduct and any other important documents or laws. If any evidence was handed over with the allegation, keep it locked up, review it and bring it to the meeting.

4. Available information:

Ask a lot of questions. If you are some one outside of the company and are brought in to help with an investigation, Pedneault suggests asking questions about the company structure, reporting lines, office layout, tools used by the employee (computers, etc), relationship with other employees, the employees personality and other information to help get a better feel for the environment. Understanding how people work together and who is friends with who is important. In the book, Pedneault discovered that there was a close relationship between the subject and their office manager. This made the team realize that if they wanted any information out of the office manager, they would need to get him away from the subject. Pedneault also recommends asking what people’s work schedules are like so that you know who to expect in the office and when. This helps with timing and planning during the investigation. Pedneault also suggests asking for physical descriptions if you are an outside working on an investigation. This way you’ll know who you are talking to control what you say.

Stay tuned for tomorrow’s post to read part two of the list.


Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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