When and How to Approach Law Enforcement and Prosecution

You have a fraud you need to investigate and will most likely bring for prosecution. When should you approach law enforcement or a prosecutor? Law enforcement wants cases as soon as possible, while consultants want the case brought to them first. Management wants to retain control as long as possible. What do you do? And, what are the best ways to deal with the reporting of fraud in your company?

This topic was discussed in London this week between a panel of investigators at the 2017 ACFE Fraud Conference Europe. Tim Harvey, CFE, head of the ACFE’s global chapter development, lead the session and was joined by Liseli Pennings, CFE, ACFE Training Director; Laura Davies, CFE, Director of Fraud at Huntswood; Martin Vaughan, Executive Associate at Forensic Interview Solutions; and Detective Inspector Chris Felton, Crime Manager of Fraud at the National Fraud Intelligence Bureau.

The panel began by defining predication. According to Pennings, the ACFE defines it as the reason you start an investigation and a way to show transparency. As also referenced in the ACFE’s Fraud Examiners Manual, predication is “the totality of circumstances that would lead a reasonable, professionally trained, and prudent individual to believe a fraud has occurred, is occurring, and/or will occur. Predication is the basis upon which an examination is commenced. Fraud examinations should not be conducted without proper predication.”

This vital step is not only the first crucial step in beginning a fraud examination, but it is also necessary to determine if a fraud will likely be prosecuted and taken seriously by law enforcement. After predication has been defined, companies then face the following scenarios:

• Conduct their own investigation and handle the punishment internally
• Conduct an internal investigation and then turn evidence over to law enforcement
• Contact law enforcement to conduct an investigation and determine punishment

When choosing to conduct an internal investigation, Vaughan advised companies to ask themselves one question, “If it’s a crime, then you need to look at yourselves and ask if you are fit to investigate the crime.” Part of being fit is being trained to examine and collect evidence properly. “Don’t walk over the broken glass,” Vaughan said. “You need to make sure you have proper evidence management systems in place and training on how to deal with evidence.”

No matter how companies decide to proceed with an allegation or suspicion of fraud, Pennings advised that you should always, “treat it as if it were going to go to prosecution.” This proactive mentality ensures that you are capturing intent, properly collecting evidence and moving forward with everything you need to enact a just consequence.

If you do choose to contact law enforcement, the panel emphasized that they are most likely to act on fraud reports that are most likely to lead to a successful investigation and/or prosecution. The panel discussed tips for companies and individuals to follow when reporting fraud to law enforcement:

• Include a well-written report that defines intent. As Pennings said, “It is easier to conduct an investigation once there is a clear sign of intent. It has to hold water that it was intentional and not an accident.”
• Make sure there is a clear collection of evidence. According to Pennings, you can’t recreate a path of evidence after the fact. It may be best to train your employees on how to forensically collect evidence at a crime scene.
• Complete and submit a report that tells a cohesive story. Felton explained that his reports are only about half a page, so companies have to tell that story succinctly and efficiently. “If it is not clear in your head, then you have got a problem,” Felton said. “When you can’t even read through it and can’t understand it, you have got a problem. Sometimes I can’t find an offense.”

The group also discussed the importance of reporting a fraud to some entity even if a company doesn’t want to report it to law enforcement for fear of reputational damage and bad publicity. Davies referenced a company she worked with who chose to go to law enforcement because they wanted to send a certain message. “From a media perspective, it actually helped because people came to them for forensics and investigation help,” Davies said. “You can make sure the messaging is positive and not negative.”

Felton echoed that as well by reminding attendees to think about how their decision will be perceived by others in the company. “What message is it sending to other employees in the business if you let that person who stole walk out the door?” he said. “I’m not going to tell you that, yes, every crime should be investigated. But potentially you are going to be picking up fraudsters from other companies coming to your company if you don’t do anything."