2025年07月25日
2023年08月14日配信
When illegal kickbacks by employees are discovered, not only can the parties involved be held criminally liable, but it can also cause significant damage to the company. This article explains the risks and damages that illegal kickbacks by employees can cause to companies, measures to prevent them, and how to gather evidence. It also provides examples of actual kickbacks and their investigation and how to choose a forensic investigation company.
What is a kickback?
This section explains the meaning of the term kickback, the difference between kickbacks and rebates and embezzlement, and examples of legally prohibited kickbacks.
Meaning and overview of kickbacks
A kickback is a "reward" or "gratuity" paid by a seller (e.g., manufacturer) to a buyer (e.g., distributor). It is a business practice for sales promotion purposes, paid when a certain amount of sales or transactions are achieved, and is not illegal. However, cases in which an individual employee receives a kickback in confidence without agreement among the companies conducting the transaction, or cases in which an employee causes a loss to the company by adding the kickback cost to the order amount, may be pursued for illegality.
Difference between Kickbacks, Rebates, and Embezzlement
In business, both rebates and kickbacks refer to the Japanese term "sales rebate. The substantive meaning is the same.
Embezzlement, on the other hand, has a different meaning. Embezzlement is the act of illegally taking something that belongs to someone else and making it one's own, all of which are illegal. There are cases where illegal kickbacks or kickbacks are made, resulting in charges of embezzlement.
Risks and Damage Illegal Kickbacks Can Cause to a Company
Illegal kickbacks by employees can cause various damages to the company. In addition to economic loss, the company loses social credibility as a company where illegal activities have taken place. In some cases, this may lead to a lawsuit. In the worst case, it may even threaten the very survival of the company.
Examples of illegal kickbacks
Kickbacks for the purpose of illegally increasing personal profits
A manufacturer's sales representative A colludes with B, a sales representative of a distributor. Suppose that the quantity of an order originally priced at 10 million yen is padded to create an estimate of 12 million yen, and that 1 million yen each goes into the pockets of the other. This is a kickback for the purpose of lining their pockets, and is illegal.
Cash or equivalent illegally provided to a business partner or other business-related person
Suppose that C, a purchasing manager of a company, was given an excessively expensive entertainment by D, a distributor's manager, before purchasing goods, and D charged the cost of the entertainment on top of the original price of the goods. Since the amount of the bill includes entertainment expenses that should not have been paid by the company, C may be guilty of fraud or breach of trust for causing damage to the company. The same is true even if the payment was not for entertainment but for cash.
Measures to Prevent Illegal Kickbacks
What should companies do on a regular basis to prevent illegal kickbacks? Here are some effective measures.
Importance of employee education such as compliance training
Inform your employees through employee education such as compliance training. Legal kickbacks are a common business practice, so it is important to make employees understand what is legal and what is illegal. Making the employees themselves aware that they will be punished will serve as a deterrent. It will also encourage whistleblowing from employees by making them aware that it is a blow to the company from a business management standpoint.
Have a professional investigative firm available at all times.
If a wrongdoing does occur, a prompt response is necessary. Develop a response flow and be prepared to work with lawyers and specialized investigation firms at any time.
How to obtain evidence of illegal kickbacks
When illegal kickbacks occur, you must quickly secure objective evidence. The following is an introduction to how to do this.
Check transaction histories, invoices, and other documents
In order to ascertain the actual status of a kickback suspected of being illegal, confirm documents such as transaction histories and invoices.
Check e-mails, chats, call history, etc.
Documents are not always the only evidence of fraud. Rather, emails, chats, call logs, etc. should also be collected, as they may be exchanged using cryptic language via email without leaving any documents.
Make sure evidence is preserved and backed up.
Since e-mail and chat history can be easily deleted, you must preserve evidence before the person is aware of your presence. If they have already been deleted, you will need to restore them from backups or repair the data.
Forensic investigation" is effective in investigating evidence of illegal kickbacks.
Forensic investigation" by a professional investigation company is effective for detailed investigation of illegal kickbacks. The reasons for this are explained below.
What is a forensic investigation?
A forensic investigation is an investigation that gathers and analyzes information related to a case to reveal evidence of wrongdoing. If evidence on digital data such as emails, chats, electronic forms, etc. is suspected, the information stored on digital devices will be used to reveal evidence and circumstances of wrongdoing.
Consultation with a professional investigation company is recommended for forensic investigations.
We recommend that forensic investigations be conducted by an investigation company rather than by the company itself. By utilizing the specialized software and know-how of an investigation company, an investigation can be conducted reliably, efficiently, and at a cost appropriate to the scale of the project.
Examples of Forensic Investigations into Illegal Kickbacks
The following are actual examples of forensic investigations of illegal kickbacks that FRONTEO has handled.
Fraud investigation regarding kickbacks of subcontracting expenses by an employee
Company A's Legal Department received a complaint from Company B, which had commissioned FRONTEO to produce sales promotion materials, that "Mr. X, the general manager of the marketing department of Company A, is extravagant in his behavior. After conducting an internal investigation and inquiring with Company B, it was discovered that there was a discrepancy between the amount billed for the promotional materials and the amount paid.
Upon receiving the request, FRONTEO extracted e-mails from Company A's internal server without Mr. X's knowledge, and conducted an investigation of the monetary transactions using a document review tool developed in-house and AI detection technology in order to find out about the transactions between Company A and Company B.
As a result, we confirmed the existence of Mr. Y of Company B, who was making kickbacks, and found that cryptic language was used between Mr. X and Mr. Y in their kickback exchanges. We conducted a person correlation investigation using the addressee and sender of the e-mails, which also led to the confirmation of two persons who appeared to be accomplices.
Subsequently, Company A and its legal advisors conducted a fact-finding hearing, and the parties involved, including Mr. X, were criminally prosecuted.
How to Select a Forensic Investigation Company to Seize Kickback Evidence
This section explains the key points to look for when selecting an investigation company to conduct a forensic investigation.
Does the company have a high level of expertise and extensive experience?
A company with a large number of investigation results will be able to select the appropriate method for each case at a reasonable cost, since they have accumulated a high level of technical expertise and know-how regarding data recovery. In particular, whether the company has a track record of requests from listed companies, the police, or government agencies is an important factor in determining reliability.
Whether the company has high technological capabilities such as AI utilization
The results of a survey will vary depending on the company's facilities and the skill level of its engineers. Please check carefully in light of the company's track record. In particular, data recovery requires specialized tools and advanced technical capabilities, and the use of AI (Artificial Intelligence) is also important. AI, which excels at analyzing large volumes of data, not only improves the efficiency of investigations, but also increases accuracy by allowing specialists to focus their resources.
Is it offered at a reasonable price?
The cost of a forensic investigation consists of the cost of data processing and retrieval, as well as the analysis and analysis of potential evidence (review) and data hosting, with the review process usually accounting for the majority of the cost. The final cost varies greatly depending on the scope and content of the investigation, and can range from several tens of thousands of yen to several million yen. We recommend choosing a vendor with a clear cost structure that includes additional fees.
In addition, awareness of the use of AI in surveys has been spreading recently, and significant cost advantages can be gained by utilizing AI to dramatically improve survey efficiency. When gathering quotes, be sure to ask for the total cost, including AI and review, and compare not only the unit cost but also the overall cost.
For investigation of evidence of illegal kickbacks, contact "FRONTEO," which has a proven track record and technology in forensic investigation.
FRONTEO has been a pioneer in forensic investigation in Japan since its establishment in 2003, and has been working to solve a variety of corporate problems. FRONTEO has a wealth of knowledge and advanced technology, including AI, to support investigations of illegal kickbacks.
By combining our experience in handling cases with our own AI engine, we are able to achieve a high level of accuracy and efficiency that no other company can match.
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