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FRAUD INVESTIGATIONS

Unprecedented scrutiny of corporate conduct of late has resulted in significant changes to the rules and regulations associated with regulatory investigation and prosecution of white-collar crime. The introduction of a swathe of new regulations, legislation and obligations has required organisations to be fully abreast of these changes and develop a raft of internal policies and procedures to help and guide them in the identification, investigation and management of fraud and white-collar crime.

Obligations for listed companies exist under the ASX Corporate Governance Council Corporate Governance Principles and Recommendations, and proprietary companies have legal duties and responsibilities under the Corporations Act 2001, with respect to governance practices and issues. Not only this but increased external scrutiny of business and financial management practices and fiscal policy from the public and regulatory bodies has meant that organisations need become more adept at meeting compliance requirements and more strategic in managing disclosure and reporting obligations, and less reliant on operating on a trust basis. Disclosures of Reportable Conduct, including allegations of fraud and financial misconduct, must be treated seriously and managed in a timely, efficient and effective manner to meet the expectations of the public and legal and regulatory agencies.

Organisations need also be aware of recent changes to Whistleblower legislation that have served to extend the legal rights and protections afforded to whistleblowers, and require companies and other entities to institute a Whistleblower Policy that details how the organisation will manage and investigate disclosures of Reportable Conduct, maintain confidentiality and safeguard the privacy of a whistleblower during and after an investigation, and protect whistleblowers from detriment and threats or acts of harm.

Edge Investigations offers organisations, including financial institutions, a full suite of investigative services, including:

  • Advisory services – provision of practical and strategic advice to organisations wishing to conduct internal investigations.

  • Supported Internal Investigation services – provision of advice and assistance to organisations who require additional support to conduct internal investigations that meet legal, regulatory and employer obligations.

  • Full Independent Investigation services – provision of an experienced external investigator to (1) conduct an impartial investigation that meets legal requirements, and (2) assist organisations to balance employer and regulatory obligations.

 

Every investigation undertaken by Edge Investigations’ team of professional, experienced and highly trained investigators is conducted to the highest standards, in full compliance with all applicable internal policies and legal and regulatory requirements.

WHEN MIGHT YOUR ORGANISATION REQUIRE A FRAUD INVESTIGATION?

An internal Fraud Investigations is required when an organisation or its appointed officer becomes aware of any behaviour, act or omission perpetrated by an employee, client, vendor or other party, which the organisation deems to be suspicious, or has reasonable grounds to suspect constitutes data or financial fraud or misconduct. This may include:

  • detection or allegations of an improper state of affairs or circumstances,

  • conduct that constitutes a contravention of applicable laws,

  • conduct that represents a danger to the public, the reputation or brand of the business, or the organisation’s financial position.

 

Examples include, but are not limited to:

  • disclosures of illegal conduct, such as theft or money laundering,

  • detection of financial irregularities, theft or misappropriation of funds,

  • allegations of fraud, and

  • breaches of, or failure to comply with, legal, regulatory or organisational policy or requirements.

WHAT IS THE GOAL OF A FRAUD INVESTIGATION?

The goal of a Fraud Investigation is to:

  • determine the facts of the matter to ascertain whether a fraudulent act has occurred,

  • collect and evaluate the evidence at hand,

  • prove criminality and/or violations of internal policies,

  • identify weaknesses in internal controls, and

  • resolve the issue in an efficient manner that adheres to the relevant legal requirements.

 

The aim is to undertake a robust investigative process that is objective, transparent, and legally defensible; satisfies legal, regulatory and organisational requirements and obligations; is able to withstand the scrutiny of external agencies and regulatory bodies; and meets the expectations of the public and the organisation’s employees and relevant stakeholders.

 

Careful management of the investigative process is required to ensure the integrity of the investigation, its findings and any actions taken by the organisation on the basis of those findings.

Edge Investigations uses rigorous, specialised investigative processes and accepted best practice, to conduct independent, unbiased investigations that assist organisations to mitigate the risks posed to their reputation by allegations of fraud and corporate misconduct and associated prosecutions.

PROCEDURAL FAIRNESS IN FRAUD INVESTIGATIONS

There are a number of fundamental and key legal principles that must be adhered to when undertaking a Fraud Investigation. An independent investigator acting on behalf of the organisation must follow standard best practice and operate within the principles of procedural fairness, whilst also taking into consideration the employer’s legal obligations and the legal rights of individuals involved or named in the matter, and giving particular regard to all relevant internal policies, applicable legislation, regulations and guidelines, and requirements of governing bodies such as ASIC.

Any conduct that may be seen as a breach of an employer’s duty of care when conducting a Fraud Investigation may constitute a failure on the part of the employer to afford their employee/s the protection and support they are entitled to under the law. Furthermore, where procedural fairness is neglected in the conduct of a Fraud Investigation, any findings of the investigation may be called into question and decisions made by the employer on the basis of those findings could invite criticism of the organisation and expose the employer to legal liability.

WHY DO FRAUD INVESTIGATIONS REQUIRE SPECIALISED PROCESSES AND PROCEDURES?

Investigations into allegations of fraud or financial misconduct tend to be forensic in nature and will often require the assistance of forensic accountants and data scientists, which sets them apart from other workplace investigations. Fraud Investigations are more likely to focus on collection of documentation and physical evidence, rather than witness reports, and require swift action to be taken to minimise the risk of losing critical evidence, optimise the chances of recouping losses, and avoid further losses of data or funds.

It is crucial that every aspect of a Fraud Investigation be conducted with total transparency and utilising specialised investigative procedures, in accordance with proper legal principles, to ensure that findings of the investigation and decisions made on its basis are fair, unbiased and able to withstand intense scrutiny.

Any error, omission or deviation from legal and/or procedural requirements may invalidate the investigation, jeopardise any potential civil or criminal case that may exist and give an employee cause to take legal action against the employer, even if an allegation is well-founded or an employee’s actions are illegal or constitute Reportable Conduct.

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REQUIREMENTS FOR CONDUCTING EFFECTIVE FRAUD INVESTIGATIONS

Successful Fraud Investigations ultimately rely on the investigator’s ability to conduct a rigorous, confidential, completely unbiased and transparent investigation in accordance with proper and lawful investigative principles, practices and processes.

Investigations into issues such as fraud and financial misconduct should only be conducted where a reasonable factual basis for investigation has been established. Where it is decided that an investigation is warranted, it must be carefully and thoroughly planned; have a clear and appropriate strategy, a clearly defined scope, and set deadlines for each stage of the investigation; accommodate the organisation’s goals and timeframe; and be conducted in accordance with applicable laws. However, while the plan needs to be comprehensive, it must also be flexible enough to accommodate any developments that may arise as the investigation progresses.

To that end, the investigator must:

  • give due consideration to confidentiality, applicable whistleblower protections, possible conflicts of interest and potential consequences.

  • provide adequate information to all parties regarding the process of the investigation and the rights, responsibilities and obligations of all stakeholders and involved or named individuals.

  • ensure all pertinent information that falls within the scope of the investigations is collected and considered – including conducting confidential interviews and producing accurate interview transcripts; collecting, collating, reviewing and retaining copies of relevant documentary evidence, including financial records, audit reports, personnel files, personal and work emails and correspondence; applying relevant policies and procedures; and collecting and considering any other relevant information.

  • maintain respectful and confidential contact with all parties at all times, giving due consideration to the nature of the alleged fraud or misconduct; the circumstances of the alleged or confirmed actions of all involved or named individuals; and communicating with professionalism and sensitivity with all parties at all times.

  • ensure that channels of communication between all stakeholders and involved and/or named individuals are kept open throughout the investigation process.

  • clearly demonstrate their objectivity and lack of bias throughout the investigation process, especially when conducting interviews, gathering and assessing the validity of evidence, drawing a conclusion, making a finding or determination, and preparing a formal investigation report.

 

Edge Investigations’ extensive experience in conducting successful specialised investigations, coupled with our proven frameworks for developing effective investigative policies and processes, positions us to provide exemplary investigative services that are efficient and timely. Our ability to carry out expert gap analysis on currently policies and internal controls, and to undertake highly-proficient risk assessments enables us to assist our clients to develop customised management solutions that reflect their organisation’s individual risk profile, and to cultivate a robust compliance culture that serves to protect their reputation and mitigate the risks posed by professional misconduct.

HOW CAN EDGE INVESTIGATIONS ASSIST YOUR ORGANISATION TO CONDUCT EFFECTIVE FRAUD INVESTIGATIONS?

Many organisations lack the skills and expertise to undertake a comprehensive investigation into allegations or disclosures of suspected fraudulent behaviour or financial misconduct that accords with relevant legal principles and complies with requisite legislative and regulatory provisions. Furthermore, depending on the nature of the alleged behaviour or misconduct, the complexity of the issue/s or action/s, or the positions or identities of the involved or named individual/s, it may be inappropriate for a Fraud Investigation to be conducted internally.

It is imperative that the selected investigator is a proficient, knowledgeable professional who is conversant with the complex legal, regulatory and procedural requirements for conducting specialised investigations into allegations of fraud or financial misconduct. Botched or inherently flawed investigations can be extremely damaging to all parties involved, so it is critical that an organisation have an experienced, unbiased, external investigator at the helm of a Fraud Investigation.

 

Edge Investigations’ specialised investigative procedures and formalised processes are based on fundamental legal principles and accepted best practice for the conduct of Fraud Investigations. These procedures and practices enable our team of experienced professional investigators to conduct transparent investigations that are efficient, effective and successful; to make unbiased, fair and legally-defensible determinations; and to deliver reliable and robust investigation reports that meet employers’ expectations and legal obligations and are able to withstand external scrutiny or legal challenge.

If you are seeking help or guidance in managing or planning an investigation into allegations of fraud of financial misconduct, or you require the services of an external investigator to plan and execute a successful Fraud Investigations, contact the team at Edge Investigations today.