The fraud investigation process. Fraud investigations begin with a mere suspicion that a fraud has occurred. Fraud investigation processes are not standard police-type processes. This is because there is little initial available evidence that fraud has occurred. In most cases, the frauds leave a trail or a series of indicators that highlights that a fraud has occurred.
The Fraud Investigation Process
Identification of fraud risk indicators is crucial in the fraud investigation process and the investigators plan to identify the fraud indicators as early as possible. There are four different categories of skill sets that are used during the fraud investigation.
Some skill sets used in fraud investigations are:
Investigative Intelligence And Analysis
During fraud investigations, performing the research is an essential skill set required from the fraud investigation team. It requires the fraud experts to publicly source the required information concerning the individuals, employees, and entities that are suspected of involvement in the fraud incident or activities. Identification of the right suspects makes the fraud identification process easier and structured.
Fraud investigative agents or experts are required to quickly identify, ownership structure, directors and Management profiles, negative media searches, bankruptcy and disqualifications, previous court cases and judgments, asset profile and locations, and internal controls and processes
Transaction analysis or forensic audit is an important component of the fraud investigation process. Transaction analysis is performed by quantified and experienced professionals.
It becomes a challenge when the fraud suspects are skilled accountants or professionals with sound knowledge of the internal controls, processes, and the financial system of the company. Forensic accountants will be needed to analyze the activities in such types of organizations where such types of professional fraudsters work. Forensic accountants not only analyze the activities of professional fraudsters but also calculate the estimated losses and damages caused by the fraudulent acts of professional and skilled fraudsters.
The search, seizure, and analysis of the electronic evidence stored in personal computers or information devices are utilized and used as computer forensic investigations. Computer forensic data can also be obtained from remote locations where cloud services are used by the company. The forensic investigators get access to the financial and other information virtually to analyze and assess the evidence and information.
It is rare for modern-day fraud incidents to be identified without the use of data storage devices and computers. Due to these reasons, computer forensics is a vital skill set.
The important part of the fraud investigations is the fieldwork and interviews of suspects, which can prove to be the conclusive evidence process. Information obtained during the interviews can become sufficient appropriate evidence.
Responses To Fraud Incidents
After initial assessment and interviews during fieldwork, the appropriate investigative plan is designed. It should be followed in the assessment of suspicion of the fraud incidents.
Every reported fraud incident is different from the other, and the reactive feedback or responses varies depending on the initial information and facts gathered. Following is the plan which may be a typical response used as the basis for further investigating and responding to a fraud incident.
When fraud is first suspected in a company, the incident could be more serious than was initially expected. This is because fraudsters do not restrict or limit their fraudulent activities to only one modus operandi. Therefore, the investigator needs to get the maximum possible information and evidence, through interviews, observations, checking, inspection, and counting of assets or cash.
In organizations with a close working environment where all employees support each other, the fraud investigation team may encounter various issues such as getting the right answers through interviews, getting the right documentary evidence, and electronic records. Such types of organizations are exposed to a larger number of frauds by their employees. Simply asking questions from the employees is not enough in such cases.
Organizations establish a dedicated fraud investigations department. The department operates with fraud investigation specialists who not only possess fraud investigations experience. They are aware of the business processes and systems. These professionals understand the internal controls system of the organizations and regularly analyze the process and controls to identify the loopholes and gaps, which may be exploited by the fraudsters.
The fraud department is an independent department, which does not perform or take part in the business running decisions or setting business strategies. Instead, they work as a line of defence to monitor the activities of business and support functions employees. Once the fraud incident occurs, the fraud department starts investigating the incident. Initial information is gathered from the available sources to develop a fraud investigation planning program and deal with reported fraud incidents. Interviews are conducted instantly to capture the maximum possible information to plan out the later investigation activities.
Initial actions of the fraud investigations team are very crucial to the eventual outcome of an investigation and, if proper planning and strategies are developed and followed, the fraud incident is easily assessed, and fraud case investigation successfully closes.
A thorough asset investigation will reveal the responsible parties’ financial holdings as well as any companies they control. Bank accounts, investments, business interests, and personal trusts, as well as any property conveyed to close associates or family members, can all be included in the scope of the asset search. Expenditures and personal wealth that far exceed legitimate income sources provide additional evidence of ill-gotten gains.
These findings are being used to advocate for better settlement outcomes, financial restitution, and post-judgment collection.
If the responsible parties refuse to return the client’s funds, the fraud investigation findings can be shared with legal counsel, law enforcement, and regulatory agencies.
The expert investigation report becomes a critical tool for civil litigation and criminal prosecution, providing an easy-to-follow roadmap of complex schemes backed up by the testimony of a licensed investigator.
A fraud investigation examines evidence to determine whether or not a fraud occurred, how it occurred, who was involved, and how much money was lost. Investigations are conducted in a variety of cases, including embezzlement, falsification of financial statements, and suspicious insurance claims.