Fraud Investigation Tips for Loss Recovery

You’re much more likely to get your money back if you act quickly and quietly

Posted by Dawn Lomer in on February 21st, 2012

Finding out that a trusted employee has been committing corporate fraud can be devastating, and you may be tempted to confront the person to communicate your disgust, but it’s in your best interest to take a deep breath and think before you act, says Reid Lester, a partner at law firm Laishley Reed LLP in Toronto.

Your chances of recovering any of the money lost to the fraud are likely to diminish if you tip off the fraudster too early. Lester recommends keeping the number of people who know about the fraud investigation as small as possible. He also recommends that you immediately get in touch with an expert.

Come Up With a Plan

“Contact somebody who can coordinate the investigation or provide some kind of oversight,” says Lester. “And it doesn’t have to be a lawyer, although it can be.” Both a lawyer and a forensic accountant can be valuable allies in the quest to recover fraud losses, he says.

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“A lot of people let the recovery opportunity slide through their fingers because they don’t know what they are doing,” says Lester. Take a deep breath and come up with a plan before doing anything, he advises. “If you don’t know how to do that, it’s not a bad idea to chat with someone who does.”

Getting strategic guidance at the outset from a lawyer doesn’t have to be expensive. A 20- to 30-minute consultation with a lawyer can be enough to get you pointed in the right direction from the start. It’s handy to know up front whether or not you may have a bank recovery claim or an opportunity to seize property. A lawyer can tell you right away what your potential for recovery is and what you, and your forensic accountant, should be looking for in the investigation.

Investigative Teamwork

The lawyer and forensic accountant have two different functions, explains Lester.

“The forensic accountant is going to try to prove the fraud and quantify it. The goal of the lawyer is to identify recovery potential,” he says.

Proving a fraud has occurred isn’t that difficult if you have lots of time, but if you want to recover anything from the fraudster, you need to act quickly and keep quiet about it. Forensic accountants know this, and can quickly gather evidence without tipping off the subject of the investigation. Working hand-in-hand, the lawyer and forensic accountant can be the victim’s best allies in recovering losses.


“The main thing you want to avoid doing is premature disclosure,” says Lester. “As soon

as there’s disclosure there’s the possibility of destruction of evidence. And that makes the proof of fraud more difficult and it also makes recovery more difficult,” he says.

It’s possible to gather a great deal of information about a fraud through a company’s network, without ever having to touch an employee’s keyboard. This allows for the kind of stealth necessary to gather the evidence without tipping off the fraudster. “You can get addresses and bank account numbers and all sorts of stuff that can, not only [illuminate] the fraud, but also identify other people who are involved in the fraud,” says Lester. “But all of that goes by the wayside if you have premature disclosure.”

Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.