Fraud cost companies millions of pounds each year but many cases aren’t being investigated by police and the fraudsters aren’t being prosecuted. If your company has been a victim of fraud, find out how you can fight back.
In November 2019, several news agencies reported that the number of criminal prosecutions in England and Wales fell to an all-time low since 1968, despite overall crimes rose to 5.3 million in the year surveyed (which was 2018). The number of criminals sent straight to jail when they are sentenced was also at its lowest in a decade. With many guilty people seem to get away, victims have been calling for improvement in the justice system.
Of all crimes in England and Wales, fraud is said to make up 31%. The Police Foundation is particularly concerned about fraud and the limited policing and criminal justice response fraudsters receive. In December 2018, they published a study that highlights the imbalance between the scale and impact of fraud and the relatively weak police response to fraud cases. The report painted a grim picture. It showed that while fraud cases took longer to investigate (514 days compared to 50 days for theft offences), an overwhelming majority of fraud cases do not result in a conviction.
Fraud victims can be individuals and companies. Traditionally, fraud has been a corporate white-collar crime committed by employees and this still remains so to a large extend. The growth of the internet, however, has enabled third-party fraudsters to reach millions of individuals and companies easily. When fraud happens, individuals suffer mentally and monetarily, while the impact on companies can also be far and wide – financial loses can lead to business failure and job losses.
If your company has become a victim of fraud and the police has not made any progress on your case, can you rely on a professional investigation company to investigate and recover the lost asset? Can the evidence help you claim insurance or use it for legal proceedings? These questions deserve honest answers, which our fraud investigations team aims to discuss in this article.
Fraud against companies
At Blackhawk Intelligence, we define any fraud undertaken by internal staff and external parties (with or without the help of internal staff) against a company as corporate fraud. Corporate fraud can range from financial fraud (like accounting fraud) to theft of products or sensitive data.
While all companies are vulnerable, the type of fraud they experience can be different depending on the sector they are in and their own set-up. For example, if your company is a professional services firm, then product theft may not be applicable but data theft can be a real threat.
Here are a few examples of common fraud.
CEO fraud happens when someone pretends to be the CEO of the company and instructs an employee in the finance department to transfer a large sum of money to the fraudsters. Once the money is transferred, it is very hard to recover the amount lost as most companies take days to realise the request hasn’t been made by the real CEO. At the same time, fraudsters work quickly to move the money into other accounts and shut the original receiving account, making it untraceable.
Theft committed by employees
Theft committed by employees ranges from staff regularly forgetting to record a friend’s purchase, helping themselves to high-value items to stealing sensitive customer data. Data theft is fast becoming a thorny problem for many companies because in many instances, insiders are the real threat. Let’s be clear – the news we read about data breaches carried out sophisticated hackers on big companies do exist, but many incidents we are hired to investigate are about data theft committed by insiders against the company they have worked for.
Accounting fraud ranges from misusing funds, misappropriation of assets, payroll fraud, overstating revenues, misrepresenting expenses or liabilities to paying or accepting bribes. Employees who are at the top of the corporate ladder holding positions of trust are in the highest risk category when it comes to accounting fraud. They tend to commit their crimes longer and deploy several complex schemes to cover their tracks.
Beware that not all fraud involves hackers writing sophisticated scripts to penetrate your system like in a Hollywood movie. Many fraud cases are relatively low-tech and some examples include creating fake invoices, switching materials or equipment, submission of duplicate expenses and stealing cash.
Why police can’t fight fraud alone
If you are a victim of fraud or your company has lost a large amount to fraudsters, you know first-hand how frustrating it is to go to the police but see little progress is being made on your case. There are several reasons why this happens and we shall discuss a few here:
- Fraud can be complex – while product or money theft is relatively straightforward, data theft and financial fraud are complex. They require specialists to sift through a large amount of data carefully, before examining, analysing and preserving the data.
- International – if the fraudsters aren’t your employees or business contacts within your circle, chances are they are not in this country and tracing them must involve foreign intelligence.
- Lack of funding – police forces and the Crown Prosecution Services lack financial resources to tackle every fraud case. The lack of funding impairs the effort even more as the number of fraud cases increases exponentially, creating a vicious cycle that is hard to break.
- Long processes – fraud is first dealt with by Action Fraud and the National Fraud Intelligence Bureau. They assess if the case is suitable for investigation before passing it on to the police. This approach takes time, while time is of the essence in most fraud cases.
- Compromised evidence – upon learning about fraud, many company managers and directors tend to confront the alleged perpetrators immediately, giving them (or their accomplices) a chance to temper with any incriminating evidence. If the alleged perpetrators are employees, this type of confrontation may also see directors risk breaking the employment laws and give the affected employees a chance to take against the company later.
As you can see from the above, fraud is a monstrous issue and police alone can’t help every individual and every company affected. In the next section, we shall outline what your company can do to reduce the risk of fraud and what actions you can take following the discovery of fraud in your company.
Call Blackhawk Intelligence on +44 (0)20 8108 9317 if your company has become a victim of fraud.
What your company can do to fight fraud
The very first step we encourage company directors to take is to assess your risks according to the size, nature and complexity of your business activities. For instance, if your company relies on third parties to maintain some part of your system, the risk assessment should highlight this and give a rating to reflect the importance accordingly.
Prevention is better than cure as the saying goes, so the next step is to look at how you can reduce the risk of fraud in response to the assessment. At Blackhawk Intelligence, our fraud investigations team group fraud reduction strategies into the following five main areas:
- Policy and process
- Management and accountability
Business leaders and company directors need to make it clear that they take fraud seriously and do not tolerate complacency. Also, they should aim to foster a culture that promotes trust and honesty.
Provide adequate training to your staff, depending on their expertise and the role they perform. Train them to spot irregular patterns which are often a sign of fraud.
Policies and processes
Policies and processes should be fair and robust rather than cumbersome. For instance, it is common to find a policy stating fraud will be investigated promptly, but if the company doesn’t provide a means for employees to report suspicious activities, then very quickly the employees will disregard the policy.
Checks and balances are designed to remove temptations, separate duties, and give clear levels of authorisation. Use of surveillance, regular accounting reconciliations, supplier due diligence checks are also part of controls.
Management and accountability
Fostering a culture of accountability, encouraging whistleblowing, and getting to know your employees better form part of the prevention strategy.
What should you do following a discovery of fraud
Fraud takes different forms so it would not make sense to have a one-size-fits-all approach following a discovery of fraud. Instead, we shall divide this subject into four separate parts:
- What you can do if your products are stolen
- What you can do if sensitive data are stolen
- What you can do if an insider has committed financial fraud
- What you can do it an outsider has defrauded your company
1. Product theft
Manufacturers, wholesalers and retailers are well aware of product theft. In each case, you must have enough evidence (CCTV footage, audit reports, witness statements, among others) first.
If the suspect is an unknown third-party, all you can do is to handle the evidence to the police. If the suspect is an internal staff, you must involve HR and seek advice from a qualified employment solicitor before interviewing the suspect. Ideally you want the suspect to confess in the meeting to at least a couple of people. If they confess, you can call the police and present the evidence to the police if you intend to prosecute.
You can fire the suspect if the evidence is strong and they have confessed, but you must abide by any guidelines given by HR and your employment solicitor.
2. Data theft
Data theft is complicated because usually the amount of data lost, who are the perpetrators and how did they do it remain unclear until you get experts in to examine the damage. Most companies also do not want their internal staff to investigate data theft as they could be accused of unfairness if it turns out that one of their colleagues has committed the offence. Accordingly, the general advice is to be discreet and call in a professional investigation company like Blackhawk Intelligence.
Our team of investigators and forensic experts are specialists with knowledge and experience. We are discreet, professional, and have access to tools needed for capturing and containing the evidence too. Preserving the evidence is a top priority as it can help you to make an insurance claim. If it is internal staff, you can use the evidence to take disciplinary action or start legal proceedings.
3. If an insider has committed financial fraud against your company
There are many reasons as to why an employee wants to hurt the company that employs them but the chief motivator is usually greed. Some want more money to enrich themselves with material things while others use the money to fund an addiction. In addition, many company owners and directors place a great amount of trust onto employees these days and without proper checks and balances, trust can be abused easily.
Accounting fraud is a common form of financial fraud committed by staff and some examples are misusing funds (or misappropriation of assets), payroll fraud, misrepresenting expenses or liabilities, accepting bribes, and overstating revenues to boost one’s performance-related bonus.
Once financial fraud is suspected, you need a professional team of workplace investigators who has accounting forensics and IT forensics experts as team members. At Blackhawk Intelligence, this is exactly how our set-up is. We have internal forensic specialists and accounting experts working with investigators. In addition, we can call upon legal, compliance, security specialists from our other functions easily to ensure we deliver excellent work.
Data preservation is our top priority in every accounting fraud case. We make sure that all data collected are legally obtained, preserved and analysed, so they can be used in either criminal or civil litigation later.
4. If an external party has defrauded your company
If someone has defrauded your company, you should file a police report immediately. If the police can’t assign any importance to your case given that they have to follow their procedures, consider getting in touch with our team.
Time is of the essence in most fraud cases so we will work efficiently to preserve any evidence, allowing you to claim insurance or start legal proceedings later. If the fraudsters have managed to infect your system with a virus, our IT specialists will look to revoke any remote access and keep your system secure.
Tracing the lost assets is often a top priority, particularly if the transgression is substantial and this is where our Asset Tracing team can help. Overseen by H. Hardoon, Bsc, FCCA, FCA, FAIA CPFA, the asset tracing core team consists of a case manager, two investigators and a support staff, along with assistance from our multi-disciplinary teams.
Blackhawk Intelligence is here to help you fight fraud
In today’s world, fraud committed against companies happens regularly and it can lead to devastating effects on the outlook of businesses of all sizes. At Blackhawk Intelligence, we have years of experience in helping companies (large and small) to fight fraud, along with tracing and recovering the lost assets.
The benefits of working with us are:
1. Experience and knowledge
Our team consists of workplace investigators, forensic accountants, IT forensic specialists, data analysts, lawyers and former law enforcement agents with decades of experience.
The three areas which we can help are:
- Fraud prevention
- Fraud management
- Fraud investigation
2. Preserving evidence
In fraud investigation, our process is highly methodological with an emphasis on data integrity and evidence perseverance so you can take disciplinary action, make an insurance claim, or start legal proceedings.
3. No conflict of interest
If your fraud management and investigation are handled by a professional company like us, your staff are free from allegations of unfairness if the perpetrators turn out to be colleagues.
We work efficiently to protect your interests and every cost is clearly stated with no hidden charges.
We respect confidentiality. Even when we need to interview parties of interest, we do so professionally and discreetly.
6. Keep you updated
Throughout that whole process, we’ll keep you updated and informed on our investigations so that you can rest easy knowing that someone is not only taking your case seriously, but is tirelessly working to obtain a positive result for you and your business.
For more information on how Blackhawk Intelligence can help you prevent and investigate fraud in your organisation, as well as asset tracing, call us on +44 (0)20 8108 9317.
This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.
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- Due diligence isn’t just an option, it’s essential
- How can asset tracing help fraud victims
- A useful guide to internal corporate investigation
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