2 years ago

Important Steps To Take When You Suspect An Internal Fraud

The numerous efforts to prevent fraud doesn’t stop it from happening entirely. In fact, 42% of Singapore-based companies surveyed experienced incidents of fraud between the years 2018 and 2020, accounting for USD 50 million losses by each of nearly a quarter of respondents. 

The increasing number of commercial fraud cases and economic crime in Singapore is impacting many more local companies. This poses some difficult questions for businesses: is your risk management programme agile enough? How are you responding to commercial fraud cases? Are you able to identify potential frauds going on in your company?

In order to help you better identify potential frauds and better respond to them, we’ve prepared a list of things to check and immediate action steps to take:

What to Check

1. Financial records

Companies should conduct a thorough audit of their cash transactions, payee accounts, accounting books, invoices, transaction histories, and tender contracts immediately. Mismatched payee names, identical payments made to vendors within the same date range, suspicious invoices, or unusual transactions are all signs of suspicious activity.

In addition, when departments spend significantly less than or more than their allocated budget, or finances are not delivered on time, this may indicate a serious problem.

2. Sudden drop in revenue

In the case of employee fraud, many businesses may see a sudden drop in their revenue. This could be caused by loss of contracts to competitors or an alteration to your financial records. If it isn’t due to global economic crises or other factors affecting businesses globally, any sudden drop in revenue could indicate a potential fraud. 

3. Loss of contracts

While it is normal for customers to switch between services, a sudden loss of multiple contracts, particularly if they go to a competitor, could be a sign of employee fraud or siphoning of business.

4. Competitors operating too similarly

In addition, if your competitors or any emerging companies in your industry begin to operate similarly to yours, this could be a sign of an employee leaking information to external parties.

Immediate Steps to Take

1. Hire a Corporate Investigation Team

Hire corporate investigation services to conduct the investigation, and a digital forensics team to assist you in collecting, analysing, and storing digital data. Hiring an external, professional corporate investigation team that’s familiar with and experienced with commercial fraud investigations is a wise choice. This is because an in-house team may not have the experience and expertise required to thoroughly investigate all grounds, nor will they be as objective as an outside source.

2. Restrict Access & Confiscate Items

It is important to immediately restrict the suspected employee’s access to company funds, other resources, and confiscate all company devices after finding out about the fraud. This is to prevent them from tampering with or erasing any potential evidence.

Do not fire any suspected employee(s) immediately, as this will make gathering evidence much more difficult. Simply limit their access to company data and do not allow them to remove any computer or company items and documents from the office.

3. Gather & Preserve Evidence

Evidence preservation is critical. A digital forensics team can help your company efficiently collect all digital data for use as evidence, secure all potential evidence and prevent others from destroying them. Avoid examining any evidence on your own because it can be easily altered if not handled properly. Did you know that by simply turning a computer on and off you can alter potential evidence?

All electronic devices and external storage devices such as USB drives, DVD and CD ROMs, as well as mobile phones, must be secured. With all the evidence, your corporate investigation team can investigate what happened, the people involved in the fraud, and why the fraud happened.

Fraud risks can be mitigated and prevented from happening with strong internal controls in place and available external resources. However, even with the necessary safeguards in place, there is no guarantee that employee fraud can be completely avoided. This is why, if and when commercial frauds like this happen, having a plan of action in place can greatly assist any business in dealing with the case — don’t make the mistake of conducting investigations without the assistance of a professional corporate investigation team.

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