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4 Ways to Jeopardize a Fraud Investigation

Don’t let the opportunity to recover losses slip through your fingers

Posted by Dawn Lomer on February 28th, 2012

The first steps you take after discovering workplace fraud can make or break your chances for loss recovery. While the need for speed is obvious (you don’t want to give the fraudster any more time to dissipate the spoils) it’s important to know where you’re going before beginning your fraud investigation. So getting a plan in place quickly is your best path to a tidy resolution with the most likely chance of recovering some of the money.

“At the outset of every fraud, at the same time that you are trying to determine the fraud… you have to have a look to see whether or not there’s property that you can chase and you have to see whether there’s a potential bank claim,” says attorney Reid Lester, a partner at law firm Laishley Reed LLP in Toronto. Lester recommends meeting with a lawyer to outline the options for recovery and to set out the next steps. “The goal is to figure out the fraud while protecting your potential asset recovery,” he says.

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A lawyer will be able to start you off on the right foot in the investigation, no matter what the circumstances are. “Every fraud is different,” says Lester.

But one thing is common, and that is the need to act quickly. “You don’t want to delay and allow your opportunities to vanish: whether it be opportunities to gather the information, or whether it be the opportunities to go after assets. Keep it quiet and act quickly,” he says.

When it comes to loss recovery, a lawyer can provide the options. “I ask two questions and then I can decide right away whether there’s a chance,” says Lester. The first question: Does the fraudster have any real property I can freeze? If it’s an employee you can check company records for his or her address, search databases to find out whether there are any other properties and check real estate documents to find out the value of any mortgages.

The second question: Is there a bank claim? If the fraud involves altered or stolen cheques, you may have a claim against the bank. “Bank claims are great because banks always pay. And there are lots of times when there are bank recovery options,” says Lester. But, again, timing is critical. Most bank account agreements allow 30 days’ notice from the time of the statement that had the fraudulent transactions on it.

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As soon as fraud is found, it’s in your best interest to start preserving evidence, advises Lester. All e-mails and documents on the employee’s computer should be preserved, preferably remotely by somebody who has access to the computer through a company network.

At the same time, it’s important to keep the investigation quiet to avoid tipping off the suspect. Moving quickly but quietly will decrease the likelihood that the employee will catch on and start getting rid of both evidence and assets.

You may find information about properties and bank accounts in e-mails and other files on the person’s company computer, but an asset search will also uncover sources for recovering funds.

Lester also advises reviewing the books and records as soon as possible to gather all the information you need to proceed with the investigation.

What Not to Do

These four mistakes can jeopardize your chances of recovering any of the money lost to fraud, says Lester.

  • Delay before taking action
  • Premature disclosure of the investigation
  • Ignorance of your rights or potential rights of recovery
  • Missed deadlines, such as the 30-day notice period for bank

Don’t let your opportunity to recoup your losses slip through your fingers.

Dawn Lomer
Dawn Lomer

Manager of Communications

Dawn Lomer is the Manager of Communications 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.

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