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The Complete Guide to Conflict of Interest Investigations

Protect your employees, reputation and bottom line by knowing how to perform thorough conflict of interest investigations.

Posted by Ann Snook on June 20th, 2019

In 2006, Wachovia Capital Markets LLC was forced to pay $25 million due to alleged conflicts of interest between research and investment banking. In 2018, Merrill Lynch paid nearly $9 million because it failed to disclose a conflict of interest regarding a relationship with a third-party product provider.

Unfortunately, conflict of interest doesn’t just happen in large companies. Organizations of any size, in any industry, can experience a conflict of interest. Knowing how to perform thorough conflict of interest investigations can protect your employees, reputation and bottom line.


Does your workforce understand the definition and implications of workplace conflicts of interest?

A strong policy can drastically reduce the number of COI incidents in your workplace. Use our free conflict of interest policy template to start drafting yours now.

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What is Conflict of Interest?


Conflict of interest (COI) is a term that applies to a wide range of behaviors. It refers to any time that an employee has a personal interest (whether actual, potential or perceived) that conflicts with the interests of their employer or a business partner.

An employee may use their position, confidential information or company time and resources for private gain. COIs can be the motive behind crimes like fraud, bribery and corruption.


Types of Private Interest

A private interest is anything personal that influences an employee’s behavior. Private interests (which are what cause conflicts of interest) can fall into the following categories:

  • Direct: an interest directly tied to the employee, his or her family or career
  • Indirect: the interest of a group, person or business the employee is or was closely connected to (e.g. a friend of a friend, the employee’s fraternity, the employee’s previous employer)
  • Financial: monetary gain or loss
  • Non-financial: “favoritism or prejudice resulting from friendship, animosity, or other personal involvement with another person or group”



Conflict of Interest Examples

Conflicts of interest come in many forms. Some examples include:

  • Special treatment (e.g. hiring, promoting or working with someone connected to the employee)
  • Receiving gifts or kickbacks
  • Using company property for personal benefit (e.g. stealing office supplies, using work cell phone as primary phone)
  • Giving confidential information to competitors or using it to start another business
  • Outside work or business activities (e.g. taking sick leave to work at another job, working for a vendor of the company part-time)



RELATED: Top 6 Compliance Concerns from Global Companies

Confidential workplace investigation report folder

Why Conflict of Interest Investigations Matter


Conflict of interest investigations can save your organization a lot of money and stress. If an employee is working against your organization’s interests, detecting their COI may help you recover thousands of dollars in losses.

Most conflict of interest investigations have two elements in common. First, the employee has an undisclosed private interest. This can be a personal relationship, an economic interest or a benefit gained from their position.

That interest then has to be adverse to their employer in some way. This could be financially damaging or compromise the employee’s duty and loyalty to their organization.

In addition to financial losses, organizations could also experience fines and reputation damage if an employee has an undisclosed conflict of interest. Failure to comply with ethics regulations that prohibit COIs could lead to a conflict of interest investigation on a federal level. Perform thorough internal investigations to protect your organization from these negative effects.


Deciding Whether to Investigate a COI


Whether you got a tip on a hotline or notice a change in an employee’s behavior, being aware of COI red flags is key. However, deciding when to start a conflict of interest investigation can be difficult. You want to trust your employees but you also don’t want your organization to suffer.

When making the decision to investigate a potential conflict of interest, consider:

  • Do you have sufficient details to conduct an investigation?
  • What are the risks to the employee and the organization if you investigate?
  • Have there been previous, similar complaints about this issue or employee?
  • What is the nature of the issue?
  • How time-sensitive is the issue?


In the case of conflicts of interest, it’s usually better to be safe than sorry. At the same time, remember that the subject is innocent until proven guilty. Keep your investigation discreet to protect the subject until you reach a conclusion.


RELATED: Investigating Misconduct in the C-Suite


The Conflict of Interest Investigation Process


After you’ve made the decision to start a conflict of interest investigation, you need to know how to proceed. Follow these steps to ensure your conflict of interest investigation is accurate, thorough and timely:

  1. Assign an investigator. External investigators are a good choice for conflict of interest investigations because they reduce the risk of a further COI between investigative staff and the subject.
  2. Identify potential risks and issues. List all of the risks the conflict of interest could pose to your organization. Be as specific as possible.
  3. Develop an investigation plan. Define the scope of the investigation, review procedures and identify sources of information and evidence.
  4. Consult with other departments. Your organization’s legal, HR and PR teams should work together to make sure no investigation data falls through the cracks. Notify senior management that an internal COI investigation is ongoing but be sure to avoid gossip and protect sensitive information.
  5. Conduct a background investigation. Review the employee’s file as well as their workplace correspondence.
  6. Perform interviews. Interview the subject and any witnesses you identify. If you learned of the conflict of interest from a hotline tip, try to interview the reporter.
  7. Create an investigation report. Outline your findings in an organized way. Decide what, if any, further action to take.



Streamline your conflict of interest investigations by using our free investigation plan template.


case theory

Conflict of Interest Detection and Prevention


The best way to ensure your organization doesn’t have to pay the price for conflict of interest investigations is to avoid them altogether. Detection and prevention takes a little extra work in order to save the company a lot of money and time later.

Develop strong policies and apply them consistently. Policies and procedures on hiring practices, gift acceptance and use of company property should apply to every employee, no exceptions. Training employees regularly on these policies increases the likelihood that they will remember and follow them.

Create a two-step approval process for decision-making in your workplace. This should include situations often associated with conflicts of interest such as choosing vendors, building business relationships, hiring and promotions. Separating tasks can also reduce your risk of a COI. For instance, the employee who writes checks to vendors should not also be permitted to sign them.

Set up an ethics hotline. A hotline with multiple reporting avenues (such as phone, email and webform) encourages employees to “blow the whistle” when they suspect another employee of misconduct, including COIs. The City of Toronto’s Fraud and Waste Hotline program reduced the city’s losses to fraud by $3.2 million, proof that hotlines are a strong misconduct prevention tool.

Finally, use a case management solution to streamline your investigation process. The software keeps you organized, no matter how many open cases you have or how many team members need to access the files. You’ll also save time creating your investigation report when you use the automatic reporting tool.

In addition, you’ll be able to spot recurring issues or multiple allegations against the same employees. Case-linking will also alert you to potential COIs.

The faster and more accurate the investigations, the less likely your organization is to suffer the consequences of a conflict of interest-related crime.


Read more about how case management software can simplify your conflict of interest investigations in our eBook Conducting Fraud Investigations with Case Management Software.

Ann Snook
Ann Snook

Marketing Writer

Ann is a marketing writer at i-Sight Software. She writes about issues related to investigations of fraud, employee misconduct, corporate security, Title IX, ethics & compliance and more.

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