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Workplace Investigations

Fraud committed by individuals externally is well understood, but what types of fraud do companies face from their own employees? In this article, we identify some of the most common types of employee and supplier fraud involved.

While the potential for external fraud is a major concern for companies, rogue employees have become another. Increasingly sophisticated systems and processes can be used by employees (including directors of a company) to disguise potentially criminal behaviour, making their activities harder to track and prosecute. At Blackhawk Intelligence our corporate investigators have the tools and experience necessary for conducting workplace investigations discretely to identify perpetrators and to help minimise this growing problem.

Espionage Investigations

The term ‘espionage’ is all too easily associated with state-driven activities, such as industrial or military espionage, or the theft of trade secrets between large corporations. However, espionage on a smaller scale is not uncommon and can occur when companies seek to uncover the operating practices of their competitors in a covert and potentially illegal manner. Often this is not actually illegal, but it can be if the employees of a target company are enticed or otherwise bribed into divulging sensitive commercial information. Insiders can also be planted in a company through legitimate recruitment and for all intent and purposes act exactly the same as a normal employee until they are called upon. Also, perpetrators may resort to covert surveillance, by placing bugs or other listening devices in sensitive parts of your company’s premises, or through conducting surveillance on your employees. Under these situations, you should consider counter-surveillance, counter-espionage services, all of which Blackhawk Investigations specialise in.

Identifying this type of potentially criminal activity is very difficult and must often be met with similar covert investigative activity, so as not to spook the perpetrator before they can be identified. The difference though is that it must be done within the letter of the law, otherwise, the investigating party could find itself in deep trouble.

Data Theft

Another fact of our times is that data is currency, especially to the criminal fraternity. Depending on the type of business, data has differing value. Data involving personal records, especially financial information, is of high value on the ‘dark web’, as it is then used to perpetrate further fraud and identity theft.

Corporate data involving client details and financial transactions has value to other, less scrupulous companies and individuals, who may look to gain from such insider information.

Data theft is often achieved through the abuse of trust and position or the unauthorised access of company databases and systems. Tracking down the perpetrators of data theft requires a digital forensics approach, achieving this covertly is a skill that Blackhawk’s investigators are expert in.

Actual Theft

While some individuals are content with non-physical theft, others are more ‘old-school’ and look to steal assets, which may include physical stock, cash or consumables. Catching up to these perpetrators often requires good surveillance and monitoring. This type of covert investigation is not without risk, as monitoring staff through the use of security cameras, discrete or otherwise, can constitute breaches in human rights and employee privacy regulations and, if used in court inappropriately, can work against an employer. Blackhawk Intelligence can advise on matters such as these.

Accounting Fraud

This typically involves the deliberate falsification of a company’s financial records. Where partners in a business are involved in different aspects of its operations, such fraud can go unnoticed for some time and be used as a scheme to falsely attract investors by overstating current assets, understating liabilities and overstating revenue. It takes considerable effort by forensic accountants to audit and accurately check these aspects of a company’s operations.

Asset Misappropriation

Any number of circumstances can drive an employee, even one with many years of trusted service, to turn to stealing or misusing company assets to solve their problems. These typically fall into two types:

Abuse or misuse of company assets: This may involve using company equipment for personal gain, misusing expense facilities, such as company credit cards, reselling stock returns meant for disposal, and many more.

Cash skimming: Rather than stealing petty cash, this involves circumventing internal controls by stealing cash before it can be entered into a company’s systems and be accounted for. It can take many forms too, such as:

  • Inventory schemes
  • Fake expenses
  • Check tampering

Blackhawk can help identify where your company is exposed and how to improve systems and processes to avoid this. We can also help you identify traits you may have missed during your employee background investigations that may reveal that all is not well and that might increase their risk profile. In addition, our asset tracing services can assist in locating high-value assets that may have been concealed in overseas jurisdictions.

Embezzlement

Embezzlement is a form of financial fraud that usually involves funds or other assets being withheld from use by a trusted party for later personal use.

It can be particularly hard to detect as often it involves relatively small sums that accumulate over time, as a way of minimising detection. Blackhawk’s forensic accounting team is well versed in the techniques used by embezzlers and can help bring them to justice.

Supply Chain or Vendor Fraud

This type of fraud, committed by a company’s employees, its representatives or by third parties in collusion with an employee, is quite varied in nature and can include examples of workplace fraud already mentioned. However, it’s also more sophisticated in nature as often there are several parties involved. Typically though, it involves the misrepresentation of goods and services or bribery and even embezzlement.

Often the complete picture of the criminal activity is shrouded when it involves suppliers and supply chains from other nations, where poor controls, lack of regulations and policing can mean that bribery and corruption are commonplace.

This form of fraud can go on for years without discovery. The key to stopping it is in the due diligence phase when setting up supplier agreement and in choosing the partners you work within in other jurisdictions. Regular reviews of supply chain activity and relationships are also crucial. Such due diligence services are one of Blackhawk Intelligence’s core skills that help companies detect and avoid supply chain fraud.

Moonlighting

Many people might think that there’s nothing wrong with an employee having a ‘job on the side’, especially if it’s essential to their financial stability. However, moonlighting can be a serious cause for concern for some companies. This can be the case where an employee is using their skills in a competitive manner or putting themselves in a vulnerable position, one that may be used as leverage by those with criminal intent. Also, if an employees ‘extracurricular’ activities are affecting their performance at work, this too can be a problem.

Companies must tread very carefully when suspecting an employee of this type of activity, especially where it may affect their rights to privacy. Carrying out covert investigations, especially surveillance, on suspect employees, has to be done within the full letter of the law if the evidence gained is to be used in a court of law. Blackhawk has assisted many companies with this type of investigation.

Faking Illness

A common problem employers face is when an employee is off work for a prolonged period claiming illness or incapacity. It’s not uncommon for an employer to become suspicious, especially if tipped off by another employee or if that person is seen in public, or as can happen, through an inadvertent social media post.

Rather like moonlighting, proving that an employee is abusing sick leave is hard to substantiate. Covert investigations or surveillance must be conducted sensitively and in full compliance with the law in these matters, otherwise the evidence gathered can work to the detriment of the employer.

Conducting covert investigations of this nature is a core speciality of Blackhawk Intelligence.

Workplace investigations – working with Blackhawk Intelligence

Any investigation involving a company workplace and that involves an employee investigation process is not a matter to be taken lightly, as employment laws and regulations can easily cause serious issues when presenting a case before a court. Two pieces of legislation are often cited in this regard and these are The Human Rights Act and The Regulatory Investigation of Persons at Work Act (RIPA). While an ongoing situation involving the suspected activities of a ‘rogue’ employee can be truly concerning, ensuring that any investigation is well thought through and crafted within the letter of the law, is absolutely essential.

If you’re interested in how to conduct an employee workplace investigation find out more here.

To discuss the issues you may face in conducting workplace investigations, call a member of Blackhawk Intelligence’s investigations experts today on +44 (0)20 8108 9317

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