The Fraud Examiner

Catching a Snake in the Grass
 

Why an impulse reaction is rarely the best strategy 


By Paul A. Rodrigues, CFE, CPA, MST, CGMA 


An employee exhibits certain behavioral red flags that puts him under suspicion for being involved in fraudulent activity against your (or your client's) organization. Now what? Because fraud is a highly emotional crime, the natural response for business managers and ownership may be to confront the suspect, terminate him, and contact law enforcement to assist with the investigation.


As fraud examiners, we know that as well-intentioned as these responses may be, acting on impulse is rarely the best course of action. Prematurely terminating the suspect or contacting law enforcement too early in the process could significantly impair the ability to build a case or identify the true nature and extent of fraudulent activity. For example, a terminated employee may decline to assist the investigation or otherwise invoke constitutional protections when law enforcement arrives.


Accordingly, the potential for such negative consequences should be communicated (and reinforced) to business leaders/clients before they are confronted with such a tense situation. They should be clearly informed that when they do suspect fraud, the urge to fire the suspect should be resisted, and concerns kept hidden from everyone associated with the organization – except for fraud examiners and outside counsel.


Once fraudulent activity is suspected, the first course of action for an organization should be to consult with an attorney and a Certified Fraud Examiner (CFE) with expertise in investigating and litigating white collar criminal matters. If this is your role, take the lead in advising the organization on the best way to move forward. Based on the nature of the allegations, counsel should identify the legal issues and coordinate with the CFE to determine the appropriate responses needed.



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