Role of HR after Discovering an Employee Fraud
Sanjay Kaushik
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Impact on the Organization
• Financial loses
• Reputation damage
• Crisis of confidence – internal / external impact
• Liability – civil and criminal
After Fraud
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• Steps to mitigate extent of loss
• Immediate consultation with an expert
• Investigation
• Action without delay
Who Should be Involved In the
Investigation
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• Human Resource Department
• Legal Department
• Security
• Management – If their knowledge will be helpful in conducting the
investigation
Effectively handling identified fraud
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Internal investigations
Identifying the suspect - Confession/admission
- Direct evidence – eyewitness
- Circumstantial evidence
• Motive
• Opportunity – access/physically possible to commit the crime
• Associate evidence – physical evidence/clues
Tracing and locating the suspect
Gather facts proving guilt for court (establish elements of the
offence)
Investigation methodology
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• Document the allegation – identify all possible indicators of fraud
• Determine potential loss – determine if error or mistake made?
• Review internal controls
• Determine the type of evidence needed to pursue – identify indicators
showing intent
• Review records – chain of custody
• Determine who should be interviewed - Develop interview approach
• Perform forensic analysis
• Complete interviews – signed statements
• Report
Follow-On To Investigation
• Management has to make decisions on disciplinary actions
• Investigators need to remain fact gatherers and not get directly involved in the specific disciplinary actions
• Can be referred for criminal prosecution, restitution, termination, reprimands; but know the positives and negatives of all of these options
• Don’t forget -- If there were vulnerabilities identified in policies, procedures or security measures – take corrective actions to close those gaps
• Investigations should lead to refinement of Threats and Vulnerabilities – linked to Risk
Analysis & deterrents
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• Learning lessons
• A joined-up approach to
intelligence- and data-sharing
• How will dishonesty be handled?
Reporting cases to the police?
• Deterrents
Staff Fraud Prevention areas
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• Staff vetting
• Promoting an anti fraud culture
• Monitoring of staff
• Effectively responding to identified staff fraud
• Analysis and deterrents
Staff Vetting
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• Organizations First line of defense
• Check, double check & then re – check
• Maximum possible accuracy of
information
• Understand the databases
• Know the strengths & weaknesses of
your vendor
Anti fraud culture
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• Promoting a culture of honesty and ethics
• New & Existing staff training and awareness
• Anonymous reporting mechanism
• Engage in regular dialogue with staff to improve systems
and identify potential problems
• Controls
Monitoring staff
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• Risk assessments - assess organization specific risks
• Monitoring at work – Information Risk controls, requisite levels of controls
• Covert monitoring – e mail monitoring, internet activity
• Risk-based approach
• Internal monitoring systems – early warning signs, exception reports
Challenges
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• Many organizations are anxious to play down the threat from within
and have been reluctant to admit to the scale of the problem or the
associated financial losses.
• Incidences of fraud may go unreported or getting mis - assigned as
credit losses/bad debts or operational losses
• Increased targeting by organized crime through infiltration and by
attempting to corrupt staff
• Employing credible deterrents