Managing Internal Investigations


By Emily Primeaux
Assistant Editor, Fraud Magazine

“If you go out into the mall to buy clothes, shoes or that smartphone you’ve got in your pocket, how much do you scrutinize the quality of that product?” asked Jonathan Davison, Chief Executive Officer of Forensic Interview Solutions at the 2015 ACFE Asia-Pacific Fraud Conference. “What I want is for you to look at your investigation as a product. Can it be scrutinized? Are there gaps in it? As an information-gatherer, where can your product go? Thinking about where it goes is the quality of it.”

Davison posed these questions to attendees at the beginning of his Pre-Conference session, Managing Internal Investigations. In a three-part session, Davison discussed the key elements of an internal investigation, from the beginning objectives, to evidence collection and analysis, and then to the finalizing the investigation by writing reports, presenting the case and overcoming reluctance to prosecute.

Beginning an Investigation

Davison first emphasized that the ACFE Report to the Nations on Occupational Fraud and Abuse tells fraud examiners the key data they need to know about the schemes they might be investigating. One example he gave was the perpetrator’s level of authority. “Depending on how you go up the structure has an impact on the level of fraud that’s being committed, the people involved in it and the amount that’s being taken,” said Davison.

Davison also explored the motivations behind why fraudsters commit their crimes. He cited the Hollinger and Clark Study of 12,000 employees in the workforce. The researchers concluded that the most common reason employees committed fraud had little to do with opportunity but more to do with motivation — the more dissatisfied the employees, the more likely they were to engage in criminal behavior.

Using these tools and an investigative mindset, Davison dove into the initiation of the internal investigation. He emphasized the ABCs — Assume nothing, Believe nothing, Check everything. Davidson also covered the key steps to conducting a fraud examination:

  • Data analysis. Before analyzing documents or conducting interviews, examiners should perform data mining and other electronic analysis of relevant information.
  • Document examination. Examiners should review documents before interviewing anyone to gain an understanding of the potential evidentiary value of the case, as well as to protect the security of documents.
  • Interviews. Examiners should interview witnesses in a logical fashion.
  • Report writing. The final step in most internal investigations is the preparation of a written report that summarizes the steps taken and conclusions reached. 

According to Davison, time is also of the essence when considering the quality of your investigative results. “Do you have sufficient time, as investigators, to conduct your investigation? The danger of that is it affects your investigation and the quality of it.”

Evidence Collection and Analysis

Davison explained that documents make up so much of the evidence in fraud cases that it’s important to understand the appropriate way of handling them. Two of the more important aspects of handling documents are chain of custody and marking evidence. 

He also discussed the importance of properly organizing evidence, since fraud cases can create large amounts of paper. Documents can be segregated by witness or transaction, key document files should be updated continuously, and databases can be established to handle large volumes of information.

Finalizing the Investigation

Writing a comprehensive, understandable and effective report is critical. “The best things in life are simple, straightforward and easy,” said Davison. He explained that the fraud examiner will need to address the classic questions of who, what, where, when, why and how. 

And finally, Davison expressed the importance of self-evaluation. “How often do you evaluate your investigations?” he asked. “Do you as a team of investigators sit down after the investigation has been finalized and critique your investigation? We can always improve and look at how we do that with an investigative mindset.”