What is the whistleblower system (whistleblower system)?Explanation of the merits of introduction and the flow of response
2023/8/7
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Fraudulent or questionable activity occurring within the organization.An investigation that collects these evidences, solves problems, and handles them is an “internal fraud investigation.”Fraud and scandals that make the news are often the case in large companies, but in reality there are situations where internal fraud and its investigation are necessary even in small and medium-sized companies.Introduces common internal impropriety methods and examples, as well as points to note and countermeasures when conducting internal impropriety investigations.
What is an internal fraud investigation?
There are many types and modus operandi of fraudulent and questionable activities that run rampant in companies, such as bribery and embezzlement, exfiltration of funds, leakage of confidential information and data, fraudulent transactions, accounting and compliance violations.Internal fraud investigations are carried out with the aim of identifying these and appropriately solving and dealing with them.In-house fraud investigations are sometimes triggered by whistle-blowing, and in such cases, it is essential to carefully handle the protection of information providers.Recognition of the effectiveness of the whistleblower system, which aims to solve problems speedily and accurately while thoroughly protecting information providers, is also increasing.
[Related article] What is the whistleblower system (whistleblower system)?Explanation of the merits of introduction and the flow of response
Common internal fraud methods
There are multiple factors in the occurrence of internal fraud, and the "fraud triangle" is a model of the process of people committing fraud.A concept commonly used in fraud investigations and risk management that states that humans are more likely to commit fraud when the following three elements are present:
XNUMX.motive
In-house improprieties arise when there is a desire to achieve something (motive), such as financial difficulties such as having debts, or pressure and desire to achieve a quota.
XNUMX.chance
An environment that makes it difficult for fraud to be detected, such as inadequate control and monitoring systems for important corporate information, and gaps in the check system, makes it easier to get involved in internal fraud.
XNUMX.justification
It is a psychological effect that eliminates ethical resistance by justifying misconduct with rationales and explanations that are convenient for you, such as "This is to make up for the low salary" and "It's just a loan, so you can pay it back later." .
Here are some examples of what often happens in fraud schemes:
Receiving bribes, embezzlement or kickbacks
If public officials, government officials, executives of private companies, etc. illegally give or receive money, it is a criminal act.In addition to embezzlement, which uses company funds and assets for personal purposes, kickbacks, which receive rewards and commissions from business partners, are also fraudulent acts depending on the situation.
Information leaks and leaks
The contents of information leaks and leaks are wide-ranging, such as taking out important company information without permission and reselling it, misusing trade secret information to trade in the stock market, and providing confidential information to competitors. The format may be digital data or paper material.Such misconduct not only causes the company to lose social credibility, but it also directly leads to major damages such as compensation for damages.
Falsification of company data
Falsification of financial data, etc. to conceal a company's business performance or financial status, falsification of reports or documents, intentional concealment of disadvantageous conditions by falsification of documents or contracts, or attendance status There are many cases of falsely applying for
Points to note when conducting internal fraud investigations
When conducting internal impropriety investigations, it is necessary to consider how to proceed, protect the reporting employee, prevent recurrence, etc., and proceed carefully and promptly.I will explain the points to be careful and the appropriate countermeasures.
Investigations cannot be carried out only within the company
There are cases where the matter is kept secret within the company for reasons such as not wanting to make things bigger, but this is not recommended.Investigations by employees who do not have specialized knowledge of internal improprieties may not lead to a solution, as there is a risk of missing information that will serve as evidence, or evidence may be hidden or destroyed and cannot be restored.
Protect employees who make reports
Companies have an obligation to protect whistleblowers.When an internal impropriety investigation begins, there is a possibility that a search for the whistleblower will occur.
Conduct fraud investigations confidentially and speedily
If it becomes known within the company that a fraudulent investigation is being carried out, there is a possibility that the relevant employee will run to destroy the evidence, or that there is a possibility that he will have an accomplice.Searching for criminals more than necessary hinders investigations and can affect human relationships within the company.A speedy resolution is required by proceeding with the investigation in the shortest possible time.
Strive to prevent recurrence of fraud
Even if it is difficult to completely eliminate internal fraud, the damage can be minimized by working to detect it at an early stage.Thorough enforcement of regulations and rules for fraud prevention, introduction of monitoring tools, and dissemination of these within the company will lead to the realization of an open and airy work environment and prevent recurrence of fraud.
How to deal with internal fraud
What action should be taken after a fraud or scandal has actually been discovered?We will introduce how to investigate employee disciplinary action, internal fraud investigation methods, and the content and flow of investigations conducted outsourced to external vendors.
Take disciplinary action against employees who commit fraud
Employees who misbehave must be punished in some way.In addition to civil liability, if confidential information leakage, theft, or embezzlement are confirmed, the person concerned will be subject to criminal penalties.If legal responsibility is not questioned, we will take appropriate measures such as disciplinary dismissal, demotion, work suspension, pay reduction, etc. in accordance with the rules stated in the employment regulations based on the Labor Standards Act.
Request an external investigation company to conduct a "forensic investigation"
As mentioned above, solving internal fraud issues requires specialized knowledge, and there is a risk that it will be difficult to clarify the facts due to incorrect handling, so it is not recommended to conduct investigations in-house alone.It is a shortcut to ask a reliable professional investigation company to conduct a "forensic investigation".
[Related article] What is a forensic investigation?Commentary on necessary cases, points to note, and examples
Examples of internal fraud investigations
As a leading company in forensic investigations, FRONTEO has dealt with many incidents so far.
Investigation of information leakage related to confidential information being taken out by retired employees
A case where the need to investigate the employee was triggered by a whistle-blowing information that an employee who will retire soon "takes confidential business information outside". When FRONTEO investigated the employee's in-house PC and smartphone, it confirmed the possession of trade secret information outside the scope of work and the possibility of multiple data leaks.FRONTEO responded to the complete deletion of related information because the lawyer admitted the fact when he interviewed the person.This led to the prevention of information leaks.
Fraud investigation into employee kickback of outsourcing costs
Company B, a business partner, pointed out that an employee of Company A was showing offensive behavior, and when an internal investigation was conducted, it was discovered that there was a discrepancy between the amount billed and the amount paid. FRONTEO determined that it was necessary to investigate the exchanges related to the transaction between Company A and Company B without being detected by the relevant employee, and when investigating the related digital data, the existence of a person who was illegally kicking back. confirmed. Company A and its corporate lawyers conducted an interview about the facts, and criminal charges were filed against the person in question and his accomplices.
*For other research casesExample of the Forensic Investigation pageSee also
Forensic investigation of internal fraud to "FRONTEO" boasting a wealth of investigation results using AI
FRONTEO boasts a wealth of investigation results in the field of internal fraud investigations, and its strengths are its ability to quickly respond to incidents and its ability to propose and investigate solutions.
Recent forensic investigations handle huge amounts of digital data, so the use of AI (artificial intelligence) is essential, but FRONTEO makes full use of its own AI engine to quickly process large amounts of data.We have also introduced in-house developed software to handle various cases, realizing rapid and cost-effective forensic investigations.
Utilizing the knowledge gained from the overwhelming number of cases, we are fully equipped to respond to highly difficult investigations and respond quickly in the event of an emergency.We will strive to minimize damage and prevent recurrence.
