How Can I Prevent Employee Fraud - Ask A Business Expert

How Can I Prevent Employee Fraud?

Nobody ever wants to imagine that one of their employees could be stealing.

But the reality is:

“Almost half (49%) of employees in the United States, and 62 percent of Canadian employees who track time admit to theft. In the US, this costs employers more than $11 billion a year.”

If you’re a leader who wants to prevent employee theft in your business, then you’re going to get a lot out of this article.

My name is Zeshaan Adatia. I’m a Private Investigator and the owner of Insight Investigations. I have written this article to help business leaders understand how a private investigator can help to stop employee fraud. To do this I’m going to introduce you to 3 types of corporate investigations and I’m also going to show you ’10 Steps To Help You Conduct An Effective Corporate Investigation.’

But before we go any further, let’s take a moment to define what employee fraud actually is.

What Is Employee Fraud?

Employee fraud happens when an employee intentionally takes something from their employer in an illegal manner. Examples of employee fraud include:

  • Time theft
  • Theft of intellectual property
  • Misuse of company assets
  • Contract breaches
  • Conflict of interest and more

Any type of corruption, collusion or fraud can financially destroy a business, so business leaders should always remain vigilant, and put prevention measures in place.

If you’d like to read our full definition of what Employee Fraud is, then check out the Ask A Business Expert Dictionary by clicking on this link.

If you’d like to watch a video featuring Business Expert Zeshaan Adatia explaining how to prevent employee fraud, then click below – or read on!

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3 Types Of Corporate Investigations To Help You Prevent Employee Fraud

Before you can even begin to prevent employee fraud, it’s worth understanding that there are different kinds of corporate investigations you can choose to conduct, which include:

  1. Workplace Investigations
  2. Corporate Security Investigations
  3. Business Monitoring

1. Workplace Investigations

Before you can even begin to prevent employee fraud, it’s worth understanding that there are different kinds of corporate investigations you can choose to conduct, which include:

  1. Workplace Investigations
  2. Corporate Security Investigations
  3. Business Monitoring

There are many ways that an employee can steal from a company.

For example, if you run a retail business, it’s possible that an employee could be skimming from the till.

If you have employees who claim expenses, it’s possible that some of them might be exaggerating how much they actually spent.

Another example of workplace fraud happens when an employee recognizes a flaw in a process that the business owner has carefully created. Things like, ‘buddy-punching’ where employees ‘clock-in’ or ‘clock-out’ for another co-worker. It doesn’t sound harmful. After all, you’re just helping out your buddy who may be running late. But legally, it is considered stealing.

Quite often in situations like these the business owners don’t even know their employees are stealing from them.

Planning, Investigating and Reporting

A workplace investigation involves planning, investigating, and reporting.

In the planning stage the lead investigator will examine the situation and identify the best methods that could be used to investigate. For example, workplace investigations commonly require interviews and/or interrogations of the individuals involved.

During the investigation stage the investigator will execute the plan and adapt as the situation unfolds. For example, witnesses could contribute important facts that may not have been brought forward in the initial stages of the investigation.

Finally, the reporting stage is critical for a couple of reasons. For example, reporting the facts in a legally admissible report is essential. Also, if there is a need to pursue charges against an employee, private investigators ensure their reports are structured properly to help your legal team identify the facts quickly.

2. Corporate Security Investigations

Corporate security investigations go beyond typical workplace investigations in a variety of ways.

For example, during a corporate security investigation a review of how corporate strategies and policies are created and implemented should be performed. During the review process an experienced private investigator can quickly identify wording in a policy that may cause vulnerability for your overall security.

During this process, private investigators also work closely with legal experts to verify if your current policies are enforceable.

Here’s a list of some common corporate security investigations for your reference:

  • Compliance Audits
  • Intellectual Property Investigations
  • Non-Competition Enforcement
  • Policy Reviews
  • Security & Loss Prevention Programs
  • Management Consulting

3. Business Monitoring

The third type of investigation is called business monitoring. This happens when a private investigator keeps an eye on your business, both online and offline, to determine whether or not something is wrong.

Business monitoring is especially helpful during mergers and acquisitions, especially to help reassure the buyer that the value of what they’re paying for is being maintained. Private investigators can also monitor competitors during this time, to ensure that they are following the rules.

Now that you understand the three basic types of corporate investigations, here are ‘10 Steps To Help You Conduct An Effective Corporate Investigation.’

Check out the Ask A Business Dictionary to learn more about employee burnout.

If you ‘d like to watch Business Expert Ashley Janssen explain how you can prevent employee burnout, then click the video link below.

And check out the Ask A Business Expert YouTube Channel to get more tips and inspiration to grow your business.

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10 Steps To Help You Conduct An Effective Corporate Investigation

The 10 steps to help you conduct an effective corporate investigation are:

  • Step 1: Qualify the Investigation
  • Step 2: Plan and Prepare For The Investigation
  • Step 3: Gather Evidence
  • Step 4: Finalize an Investigation Plan
  • Step 5: Consult with All Concerned Parties
  • Step 6: Interviews and Interrogations
  • Step 7: Evaluate Breaches and Assess Credibility
  • Step 8: Follow-Up
  • Step 9: Reporting
  • Step 10: Resolution and Recommendations

By following this process you’ll be able to identify what went wrong, and how to prevent employee fraud in the future.

10 Steps To Help You Conduct An Effective Corporate Investigation

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Step 1: Qualify the Investigation

Before you get started, the lead private investigator will assess whether the investigation should even happen.

For example, they will make sure that there are no conflicts of interest, or bias towards one party.

They will also look at your internal policies, and if those policies are enforceable, then the investigator will recommend whether you should proceed with an investigation.

During the qualifying stage the investigator will also help you to determine the overall scope of the investigation, which will also lead to choosing the best method to help you move forward.

Step 2: Plan and Prepare for the Investigation

To get ready for the investigation you will be asked for

  • A description of the events that led to the investigation
  • A detailed timeline of when each event took place
  • A description of any follow-up actions that have already been taken

You’ll also be asked to identify who the investigator will need to talk to, so that they can set aside time to meet with the investigator.

Step 3: Gather Evidence

During any investigation all relevant evidence will be gathered, reviewed, and preserved.

For example, I was once hired to investigate a case involving theft of proprietary information where one of the suspects was careful not to leave a trail of digital evidence.

The suspect was believed to have stolen client and vendor details from the company so that they could then establish their own competing business.

By coordinating with our digital forensics team, we successfully collected enough information to provide the client with a conclusion and admissible evidence.

The key factors in the evidence collection stage were to quickly identify and secure any digital devices that the suspect had access to.

Other examples of evidence include:

  • Onboarding documentation
  • Agreements
  • Policies
  • Procedures
  • Laws
  • Security video footage
  • IT records and more

It’s worth noting that some companies have committees and unions that may grant the accused the right to representation during some portions of the investigation.

These same committees and unions may also have additional insights about the situation which may influence evidence collection including:

  • Number of complaints
  • Additional employee feedback
  • Employee performance feedback
  • Staff retention rates and more
“Every investigation evolves as new facts are uncovered.”
Zeshaan Adatia

Step 4: Finalize an Investigation Plan

“Finalizing” an investigation plan may infer that the steps must be followed in a specific order, but this is not always the case. Every investigation evolves as new facts are uncovered.

For example, there may have been whistleblowers that considered reporting the events but did not come forward until they knew that they had the option to anonymously report their coworkers.

The main items to be finalized in step 4 include:

  • The nature of misconduct
  • Investigation methods
  • Additional resources required
  • Potential witnesses
  • Union involvement
  • Investigator responsibilities
  • Uncollected evidence
  • Main contacts and more

You’ll also want to prioritize any immediate actions that should be taken.

Step 5: Consult with All Concerned Parties

There are many individuals to consult with during a corporate investigation including:

  • The complainant
  • The respondent
  • Supervisors
  • Management
  • Administrators
  • Committee members
  • Union representatives
  • Your legal department
  • Board members and more

During these consultations a private investigator will also ask people about their understanding of the breach, any additional information, the scope of the investigation, and whether releasing a public statement is necessary.

"A person who is leaning forward or nodding is usually approachable, while someone who is interrupting and frowning indicates that they are closed off."
Zeshaan Adatia

Step 6: Interviews and Interrogations

To get ready for any interview, here are a few key considerations.

Prior to any interviews taking place, ensure the interview room meets legal requirements regarding information shared during the interview.

Investigators should also draft questions in advance that will clarify the facts. The drafted questions should fall into three distinct categories:

  • Closed questions which simply require a yes or no answer
  • Open questions which require a narrative response
  • Leading questions provide an answer within a question to allow the individual to confirm the information or correct the interviewer with new information

Private investigators with interrogation training are also experts at reading body language. This is important because body language can tell an investigator whether or not they have a rapport with the person being interviewed.

For example, a person who is leaning forward or nodding is usually approachable, while someone who is interrupting and frowning indicates that they are closed off.

In terms of an actual interrogation, here’s an example from my own career that you can learn from.

I was once responsible for interrogating a fraud suspect at a large retail store. In this case the suspect was using a debit card reader to process customer payments, but instead of those payments going to the store, they actually went into the clerk’s personal bank account.

After collecting the necessary evidence, I scheduled a meeting with the district manager and the suspect.

It is a common tactic for investigators to have the suspect sit in the interrogation room alone for a few minutes to contemplate the reason for the meeting. Then both the suspect’s manager and the investigator enter the room and place a large file on the table with the suspect’s name on the cover.

There may not be any documents related to the investigation held inside the file, but the suspect may get a sense that a large investigation has taken place and the best course of action may be to explain the truth.

These tactics have been glamorized by movies for many years, but these methods remain an excellent tactic for admission seeking, especially when guilty suspects are confronted with evidence that holds them accountable.

In this case, once the suspect was presented with the facts, they quickly admitted to using their own debit machine to process customer payments.

“In 85% of cases fraudsters displayed at least one behavioral red flag of fraud and in 50% of cases they exhibited multiple red flags.”

Step 7: Evaluate Breaches and Assess Credibility

After all of the information has been gathered it’s time to determine if an actual breach has occurred.

It’s important to remain objective at this stage and not to jump to any final conclusions

You’ll also want to objectively examine things like:

  • The logical timeline
  • History of misconduct
  • Reasons for deception
  • Whether or not the stories are corroborated
  • Any verbal or physical signs of deception

Credibility should then be assessed based on the information that is reported.

Step 8: Follow-Up

Of course, it’s natural that new information and evidence may have been found during the investigation, which may require additional consultation or interviews. So if anyone involved requires additional time then give it to them.

Because in the end you want to make sure that the investigation is thorough, and that you are well on your way to stopping any employee fraud in the future.

Step 9: Reporting

Final reports should summarize the details of each incident, evidence gathered, and the conclusion of the investigation.

The report should be structured so that it can be submitted as admissible evidence in court. If any party were to challenge the investigation with legal action, the investigative team should be able to defend their actions with the evidence collected.

Step 10: Resolution and Recommendations

Investigators have a duty to see the investigation through to resolution, which means that the investigation will likely continue until the client considers the matter resolved.

The lead investigator will consider the investigation resolved once further investigation is unlikely to lead to any relevant information and no further investigation is required.

The resolution should be documented to outline the action taken by each party.

Once the report has been submitted to the appropriate department, the lead investigator should explain any recommendations relating to prevention, auditing, and post-investigation duties.

For example, I once recommended that an entire night shift of 12 employees should be terminated from a distribution center.

When an entire department has knowingly acted against the best interest of their employer, swift action must be taken.

In this case the client made a compromise by terminating the shift manager, both supervisors, and three key suspects involved in the investigation.

To help them prevent a similar situation from occurring in the future, I assisted in providing security training for new supervisors and management, along with updating their policies and procedures to eliminate potential misunderstandings.

Conclusion

As an employer, you place a great deal of trust in your employees to manage your financial, physical, and informational assets. When this trust is broken it is important to deal with the situation as quickly as possible so you can reduce the risks and financial losses.

In this article we helped you learn 3 Types of Corporate Investigations to Help You Prevent Employee Fraud which are:

  1. Workplace Investigations
  2. Corporate Security Investigations
  3. Business Monitoring

We also showed you ‘10 Steps To Help You Conduct An Effective Corporate Investigation.’

  1. Step 1: Qualify the Investigation
  2. Step 2: Plan and Prepare for the Investigation
  3. Step 3: Gather Evidence
  4. Step 4: Finalize an Investigation Plan
  5. Step 5: Consult with All Concerned Parties
  6. Step 6: Interviews and Interrogations
  7. Step 7: Evaluate Breaches and Assess Credibility
  8. Step 8: Follow-Up
  9. Step 9: Reporting
  10. Step 10: Resolution and Recommendations

Understanding employee fraud prevention and investigation can better equip you to assess your options before and after an incident. Private investigators have the experience and training to interpret the subtleties of all aspects of the investigation.

If you want to learn more about hiring the right private investigator, then reach out to Insight Investigations for a free consultation.

Picture of Zeshaan Adatia

Zeshaan Adatia

Zeshaan Adatia is an experienced Private Investigator and the Owner of Insight Investigations, a one-stop solution for all of your investigation needs.
Insight Investigations offers a wide variety of services in many areas including insurance, corporate, domestic, security and loss prevention, fraud, financial investigations and more.
Zeshaan is also passionate about raising the bar across the Private Investigation industry, which is why he offers tools to new investigators to standardize templates, procedures, and specializations.

Insight Investigations is also a proud member of BNI Excellence in Calgary, Alberta, Canada.

Contact Zeshaan

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