Key Steps to Take When Suspected Fraud Has Occurred in Your Tribal Organization

According to the 2016 Global Fraud Study, Report to the Nations on Occupational Fraud and Abuse, 18.7% of frauds reported occurred within government organizations—a category that includes tribes and their related entities.

Knowing how to react when a potential fraud event has occurred can help lessen its impact.

Innocent until Proven Guilty

A suspected perpetrator is innocent until proven guilty—avoid immediate termination or disciplinary actions.

It’s beneficial for a suspected fraudster to be cooperative because he or she is often the best witness and can tell investigators:

  • How the fraud was committed
  • Who else was involved
  • How much and what was taken
  • What controls were weak or circumvented, allowing the fraud to occur

When someone is suspected of having committed occupational fraud, leadership should consult with its human-resources department and fraud response team. It may be worth considering putting the suspected fraudster on administrative leave, pending additional investigation.

If there’s no immediate or significant risk to the organization or its assets, investigators may want to work around a suspected fraudster while the investigation is underway. The fraud response team will need to evaluate these alternatives based on their understanding of the situation.

Assemble a Fraud Response Team

A successful fraud investigation involves individuals with different skill sets. Professionals commonly involved in investigations include the following: 

  • Certified fraud examiners
  • Legal counsel
  • Human resources personnel
  • Internal auditors
  • Management and accounting employees

Due consideration should be given to help ensure team members:

  • Have no conflicts of interest
  • Can work well together
  • Have the necessary skill sets and availability
  • Can maintain confidentiality

Don’t Delay, Act Quickly

A fraud response team should launch an investigation as soon as there’s enough evidence to suspect fraud has occurred. A management team must be prepared to address a number of issues quickly and usually under stressful conditions.

The most pressing concerns are preventing additional losses and mitigating damage to the reputation of the organization, its customers, and its employees.

Immediate Actions

  • Cut off the suspected perpetrator’s access to the organization’s assets.
  • Protect evidence by securing physical access to documentation and records.
  • Lock access to the computer network and systems.
  • Secure the suspected perpetrator’s computer, office, or workstation.

Develop a Fraud Investigation Plan

Once it’s been determined there’s been a suspected fraud event that warrants investigation, a fraud investigation plan should be developed.

Key Components

  • Review what’s known and gain an understanding of the key issues.
  • Define the scope and objectives of the investigation.
  • Identify communications protocol.
  • Establish a timeframe for the investigation.
  • Define each team member’s responsibilities and roles and stress confidentiality.
  • Consider involving outside law enforcement or regulators.
  • Address operational issues.
  • Prepare management and employees who’ll be involved in the investigation.
  • Consider client-attorney privilege to provide defense against third-party attempts to discover materials or evidence.

Characteristics of an Effective Plan

  • Simple and not so detailed that it limits its effectiveness.
  • Flexible, so a team can be assembled quickly and an investigation can be started and completed timely.
  • Serious, so it sends a message that management takes fraud seriously.
  • Consistent, enabling management to respond to suspected fraud in a reliable manner.

We’re Here to Help

For more information about ways to better prepare your fraud response, contact your Moss Adams professional.