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For a company, employee embezzlement is a serious problem that not only results in financial losses, but also leads to a loss of social credibility. However, many companies may not be fully prepared with specific response procedures and investigative methods when embezzlement is discovered. A forensic investigation is required to investigate and collect evidence of embezzlement. This article will explain from a practical perspective the appropriate response when embezzlement is discovered, the investigation process, and measures to prevent recurrence.
Initial response and procedures within the company when embezzlement is discovered
Responding to an embezzlement case requires a wide range of efforts, from the initial response after it is discovered to implementing measures to prevent recurrence, but the first step after it is discovered is to respond quickly.
What is embezzlement?
Embezzlement refers to the act of an employee of a company or other organization misusing money or items that have been entrusted to them in the course of their duties for personal use or running off with them.
Initial response when embezzlement is discovered
When embezzlement is suspected, the most important thing is to respond calmly and quickly. First, you need to thoroughly understand and record the facts. Specifically, you need to organize the chronology of when, who, and how the fraud was discovered, and identify as much as possible the approximate amount of damage and the scope of those involved.
It is particularly important to manage information at this stage. If unrelated people become aware of the information, it could hinder subsequent investigations, so it is wise to limit the number of people involved in the response to the bare minimum.
Procedures, methods and necessity of collecting evidence of embezzlement
Collecting evidence is a crucial step that determines the success or failure of subsequent responses. In addition to paper-based evidence such as accounting books and receipts, the importance of digital data such as e-mails and access histories has been increasing in recent years.
Particular care must be taken to prevent the loss or falsification of evidence. For accounting-related documents, it is important to record who collected which document, when, and to back up electronic data as soon as possible to prevent it from being overwritten or deleted.
How to conduct an internal investigation into embezzlement, what not to do, and points to note
To reiterate, when starting an investigation into embezzlement, it is important to thoroughly verify the facts and preserve evidence from the early stages of the investigation. Collect and preserve all evidence, such as testimony from those involved, accounting records, emails, and surveillance camera footage, and prevent the destruction of evidence, such as falsifying or modifying data. Digital data in particular requires specialized knowledge and tools, so it is effective to seek the cooperation of an investigation company.
Another thing to note is that although the person's confession is an important factor, it is necessary to secure evidence through a preliminary investigation before the company questions the person. Also, excessive questioning may result in legal liability, so it is important not to force the person.
Embezzlement may also result in civil claims for damages and criminal liability. Keep in mind that disciplinary action or criminal charges based on the results of an investigation must be taken in strict accordance with legal procedures.
Systems and measures that a company should take to prevent internal fraud, including embezzlement
Although it is essential to respond after embezzlement is discovered, it is also important to take preventive measures. In order to prevent embezzlement, it is necessary to take specific fraud prevention measures, such as conducting regular internal audits, establishing a mutual checking system with multiple people, and providing thorough employee education. Such preparations during peacetime are the most effective measures.
Establishment and implementation of internal controls, such as the distribution of authority and a system for checking records
It is necessary to identify risks in your company's business processes, and if the business involves handling money, to manage authority and set rules such as "who gives approval, at what stage, and what kind of approval should be given." Regularly checking records such as operation logs and history will not only help to detect problems early, but also act as a deterrent. Furthermore, it is important to conduct internal audits and check that rules are being properly implemented without becoming a mere formality.
Employee education and awareness raising
Employee education is an important initiative in preventing fraud. Make sure to inform employees of the reasons why rules are necessary and the impact that will occur if fraud occurs, using specific examples. It is also important to prepare a reporting system to lead to early detection and early response, and to inform employees that it is a system that can be used with confidence, where those who discover and report fraud will be protected.
"Forensic investigation" is effective in investigating evidence of embezzlement
In the unlikely event that embezzlement is discovered, it is necessary to investigate whether there are any similar cases and strengthen the system to identify the cause and prevent recurrence. Forensic investigation by a specialized investigation company is effective for detailed investigation of embezzlement. We will explain the details of forensic investigation.
What is a Forensic Investigation?
Forensic investigation, especially digital forensics, is an investigative method to collect and analyze electronic data left on digital devices to identify evidence of fraud. Digital data has been increasing in business in recent years, and its importance is also increasing.
For example, by analyzing the operation logs of an accounting system, it is possible to find evidence of unusual transactions or falsification. Also, by restoring deleted emails and documents, it is possible to find correspondence that provides evidence of embezzlement.
Forensic investigations, consult a specialized forensic vendor
Forensic investigations require advanced expertise and special equipment, so we recommend that you hire a professional company. In particular, to ensure that the evidence is legally valid, proper procedures by experts are essential.
When selecting a specialist company, it is important to thoroughly check the company's past investigation results, as well as the experience and qualifications of the investigators. In addition, since confidential information will be handled, it is essential to choose a company that is highly reliable.
The cost of an investigation will vary greatly depending on the scale and complexity of the case, but considering the amount of loss caused by the embezzlement, the need to uncover the full picture, and subsequent litigation, it should be viewed as a necessary investment.
Forensic investigations are essential to collect digital evidence in embezzlement cases
In many cases of embezzlement, evidence can be obtained from digital data such as cloud storage and emails, server log files, etc., and forensic investigations are essential to ascertaining the facts and clarifying the amount of damages, etc. By preserving all potentially relevant data without exception, and by carefully restoring deleted data and analyzing logs, you will be able to gather legally valid materials as evidence.
How to choose a forensic investigation company to obtain evidence of embezzlement in your company
We will explain the points you should look at when choosing a forensic investigation company.
Do you have a high level of expertise and a wealth of experience?
Companies with a track record of extensive investigations have accumulated high technical capabilities and know-how regarding data recovery, so they will be able to select the appropriate method for each case and respond at a reasonable cost. In particular, whether or not a company has a track record of conducting investigations for listed companies, police, government agencies, etc. is an important point in judging their reliability.
Do you have high technical capabilities such as AI utilization?
In particular, data recovery and analysis requires specialized tools and advanced technical skills, and the results of the investigation are directly linked to the equipment and proficiency of the engineers at the company. The use of AI (artificial intelligence) is also an important point. By utilizing AI, which excels at analyzing large amounts of data, not only can the investigation be made more efficient, but the accuracy can also be improved by focusing the investigators' resources more.
Is it offered at a fair price?
Forensic investigation costs include data processing and search costs, analysis and analysis (review) of whether evidence can be obtained, and data hosting, but usually the review process accounts for the majority of costs.The final amount varies greatly depending on the scope and contents of the investigation, and ranges from tens of thousands of yen to several million yen.We recommend choosing a vendor with a clear cost structure, including additional charges.
In addition, awareness of using AI in investigations has been spreading recently, and using AI to dramatically improve the efficiency of investigations can bring significant cost benefits. When collecting quotes, be sure to ask for the total cost including AI and reviews, and carefully compare not only unit prices but also overall costs.
For evidence investigation of embezzlement in your company, contact "FRONTEO" with its proven track record and technology in forensic investigations
FRONTEO has been a pioneer in forensic investigations in Japan since its founding in 2003, and has supported the investigations of many companies. In addition, by utilizing its in-house developed AI engine "KIBIT," FRONTEO has significantly reduced the labor required for document review, reducing costs and enabling highly accurate investigations.
In the investigation of embezzlement in a company, the key is to respond quickly and reliably, such as by proceeding with the investigation and preserving evidence without the parties being aware of the case. By combining our extensive knowledge of case management with the high technical capabilities of our in-house AI engine, FRONTEO will achieve a high level of accuracy and efficiency that cannot be achieved by other companies and will tackle embezzlement investigations.
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