There’s no way around it—according to the Association of Certified Fraud Examiners, an estimated five percent of annual revenues are lost to financial crime. What do these numbers mean for you? Big or small, public or private – with statistics like these, there’s a good chance your business is more likely than not to fall victim to internal fraud. The median loss caused by fraud in the ACFE’s study was $145,000—no matter how you spin it, fraud is pricey. Your response to the suspected fraud, however, will determine whether you can recover from the loss or suffer even further damages. Of the companies in the ACFE’s 2014 Report to the Nations, only 14 percent of the victim organizations made a full recovery, and 58 percent made no recoveries, emphasizing the importance of knowing how to respond when fraud is suspected in your business. Minimize the severity of the situation (and the cost to you) by implementing these best practices upon suspicion of employee wrong-doing.
Secure, Secure, Secure
Immediately secure any and all potential evidence by safeguarding data and any other potentially relevant information—but don’t examine this evidence on your own, wait for a trained professional to maintain the integrity of the evidence. Computers and other electronic media sources, such as thumb drives, discs and cell phones, are likely to contain a wealth of information regarding the potential fraud. If the computer is on, leave it on – it is off, leave it off. Simply turning on or off a computer can alter potential evidence. Similarly, don’t connect any external devices to the computer, doing so can alter the original evidence, potentially rendering it useless for evidentiary purposes. A computer forensic specialist will be able to mirror image relevant hard drives, creating a bit-by-bit replica of the original drive allowing examination of the copied drive without disturbing the data that exists on the original drive. A computer forensic specialist will also search for documents, emails and files (deleted or intact) that may be relevant to the investigation. Don’t forget to safeguard the employee’s desk and office—but don’t search the office, as this should be a task undertaken solely by trained professionals in order to avoid a potential misstep. The totality of the evidence will provide the financial investigators with the five W’s (who, what, when, where and why) of the potential fraud.
Assemble a Team
Another best practice to deploy immediately upon suspicion of employee wrong-doing is to hire the appropriate trained professionals, including: legal counsel, a financial investigator and a computer forensic specialist.
Your initial response to the suspicion of fraud in your workplace can make or break the outcome of an investigation. While these two best practices are important, there are multiple other best practices you should implement to minimize the damage from employee wrong-doing. Check back for part two in the coming weeks.