Fraud cases can have many implications for businesses of any size and industry. Fraud cases need to be handled correctly as they can affect the company on many levels, one of them being collateral damage or the “domino effect”. Depending on the seniority level of the employee who committed fraud, the response of the business can set the standard of how fraud cases are handled. 

For example, if a high-level employee is treated leniently then a lower-level employee may be tempted to also follow in their steps. This can be very damaging as it can override a zero-tolerance policy when it comes to fraudulent activity, theft, or other types of misconduct.

One of the many disadvantages of fraud is financial losses with other complications such as loss of business opportunities and lower employee morale not being very far behind. Over a quarter of organisations surveyed by PwC reported over a million dollars in financial loss due to fraud. It’s important to note that fraud can be external or internal, meaning that it can come from employees within the business or from external actors. 

How to handle a case of fraud correctly 

There are many steps to consider when it comes to handling fraud, whether that is external or internal fraud. It’s always advisable to look for red flags that may include higher than normal invoices, unnecessary payments or suppliers, badly written income statements or missing cash. Some steps your business can take include: 

1. Hiring an investigation team 

2. Looking into case management systems 

3. Understanding what happened (and by who) 

4. Taking action 

5. Recovering the loss if possible 

1. Hiring an investigation team 

Before starting any type of investigation into fraud, it is important to have a Fraud Response Plan. The Fraud Response Plan should lay out all the steps that need to be followed if the company suspects fraud to have taken place. It should define the responsibilities of employees, investigators or any other parties involved. The plan should also show employees how to report fraud if they have noticed any signs or have strong evidence. This will allow the company to hire a specialised investigation team that has experience with the type of fraud the company is dealing with. It can save time as the investigation team can be hired as soon as possible since the company knows what steps to follow. 

A lot of research needs to go into looking for the right investigation team. Asking colleagues for suggestions, checking with the HR experts on what previous investigations team they have worked on can be two of the ways to find the right people for the job. Make sure that the investigation team can align with the outcomes that you want to get out of the investigation. 

2. Looking into case management systems 

Investigating fraud cases can be a time-consuming process and a lot of resources are allocated into finding out what happened, by who, when and how it can be prevented in the future. Case management systems can be very beneficial as they can cut investigation costs, save time and allow employees to focus on the core business tasks while the investigation is undertaken. They can provide investigators with automation options and progress updates as well as reminders of what the next steps are. They’re particularly useful if you have regulatory requirements around fraud investigations, e.g. in the financial sector, as you can use the workflow to ensure you meet your process and reporting requirements.

Our clients use Polonious to streamline the investigation process and achieve a more efficient investigation. We are ISO 9001 and ISO 27001 certified, showing our commitment to helping every investigation team handle fraud cases securely and effectively. 

Before looking for a case management system, you should try to understand what the needs of your business are going into the investigation. Are you looking for a case management system that has multi-user access? That has data analysis tools? Or are you focusing mainly on improving workflows and having flexibility? Case management systems can vary so it is important to know what you want before searching for the right one. Talk to Polonious today if you’d like some help figuring out what you need in a case management system.


3. Understanding what happened 

Once an investigation team and a case management system have been chosen, the investigation can start. The first step of the investigation process will focus on what happened and by who. This will involve gathering facts, any documents or files, anonymous complaints or CCTV footage. At this stage, it is necessary to collect a wide variety of evidence, including direct and indirect evidence. An experienced investigation team will be able to handle these steps correctly while your business can focus on their everyday operation activities. However, it’s important to know what the process actually entails. 

The investigation team may need to hold interviews with stakeholders and it’s essential that no information about those involved is leaked to external parties. This is because the investigators may conduct interviews with innocent individuals that have not committed fraud but are being interviewed for evidence purposes. As a company, you need to ensure that confidentiality is maintained at all stages of the investigation, even when the investigation is finished. 

This can help prevent retaliation and keep high employee morale.

4. Taking action 

There are many outcomes that might follow after a workplace investigation into a fraud case. These include: 

  • Taking no action 
  • Providing extra training and support 
  • Creating new policies or modifying current ones 
  • Taking disciplinary action 
  • Taking legal action 
  • Recovering the loss if possible

Taking no action 

Taking no action can indicate that the investigation didn’t find anything wrong and as part of this step an employee may need to be reinstated if they were previously suspended. When welcoming an employee back to the workplace it is important to provide them with any counselling or support they may need after coming back. Ensure that you handle any retaliation or workplace alienation as employees may have developed a different image of their suspended colleague during the time they were away. 

Providing extra training and support 

If the investigation found that employees do not fully understand anti-fraud policies, then additional training is recommended. The investigators may give some advice on how training can be approached while external professionals can be hired to achieve better results. 

Creating new policies or modifying current ones 

As part of the investigation, the organisation could discover that their policies do not fully cover all the different types of fraud and the consequences that follow. The company could find out that their policies were unclear, vague, badly written, outdated or too complicated. Reviewing company policies regularly is necessary for maintaining compliance, discouraging future cases of fraud, showing commitment in keeping a safe and healthy work environment and showing employees their feedback is listened to and appreciated. 

Taking disciplinary action 

If the investigation found that something took place then there are some steps the company might need to consider. Depending on the severity of the fraud case, an employee may receive a verbal or written warning, they may be demoted or terminated. During this step it is important to consider the role of the employee within the company and their history. Also, depending on their actions, they might have influenced other individuals that work under them. 

Taking legal action 

In severe cases of fraud, the business may need to take legal action against the employee or any external actors. The organisation may need to report the findings of the investigation to external third parties or government bodies that will be involved in the legal case.

Recovering the loss if possible 

In some cases it may be possible to recover any financial losses that occurred because of fraud. This will depend on how quickly the company took action after suspicions of fraud, if the company has any insurance claims, or even through legal action against those who committed fraud. To maximise the chances of recovering losses, companies should have an effective documenting system in place that will allow them to uncover where fraud took place fast. Analytics software may raise red flags if it suspects that the numbers are wrong when paying employees or submitting invoices. This can highlight what is wrong and help the company block any suspicious and unauthorised payments.

Preventing fraud cases and moving forward 

Preventing future fraud cases is a complicated task. The company’s response to the current fraud case will be one of the best ways to deter fraudsters in the future. A strong response highlights the organisation’s commitment to a “zero tolerance” policy against fraud and shows that the business doesn’t cut corners or forgive misconduct. 

Fostering a better work culture where employees value ethics and compliance is one of the most effective ways to prevent fraud. The hiring process can also be improved to detect any conflicts of interest but also gauge the personality and history of the employee coming into the company. 

Background checks for prospective employees in high risk roles are necessary to ensure that they haven’t committed any type of misconduct in the past. Moreover, ensure that policies are easily accessible and clearly outline what the consequences of fraud could be, including termination of employment and legal action. It is also advisable that the policies outline how the company monitors fraud so future actors are less likely to try something illegal since they know they will get caught.

Are you looking for a faster and more efficient investigation?

Polonious is trusted by many companies worldwide for providing a secure and reliable case management system. We support our customers’ investigation teams to help them achieve better investigations faster. If you want to automate your investigation and maintain confidentiality, reach out! We will be happy to give you a demo!