A fraud response plan is a detailed and systematic process of identifying and prioritizing the fraud risks and motivators that lie within an organization. It recognizes the fraud schemes that can emanate from these fraud risks and links the identified schemes to internal controls.

The potential impact of fraud on your organization is directly related to both response time and the manner in which you respond. A slow response, or incorrect decisions, can greatly increase the financial and reputational damage to your organization. The fraud response plan delineates how an organization responds when a fraud occurs. It outlines the hierarchy and chain of authority, and establishes employee responsibilities and proper reporting channels. The nagel + associates team can assist clients in the development of a crisis response plan, which includes:

  • Investigating the incident through specific and pre-determined steps when fraud allegations surface
  • Determining the protocol to identify and properly secure potential sources of evidence until investigators arrive (to mitigate contamination or destruction)
  • Establishing the procedures to prevent any further loss in the immediate future
  • Setting out the internal and external lines and chain of communication that must occur;
  • Ensuring contact information for the people who need to be involved in the initial response is readily available
  • Creating a roadmap to ensure processes are strengthened to prevent the recurrence of a fraud

The aforementioned benefits of a crisis response plan safeguard your organization and ensure that a consistent and thorough approach is taken when dealing with reported incidences of fraud. The fraud response plan effectively mitigates losses and increases the likelihood of a successful investigation.

The nagel + associates team of professionals has been retained in several cases where initially, management teams responded in an impulsive and erroneous manner by reviewing electronic devices prior to them being properly secured and imaged. As a result, key evidence was unfortunately compromised. Having the knowledge to distinguish between proper and improper action is critical to the success or failure of an investigation, and is often considered to be a determining factor in the outcome of many cases.

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Ben Kaye was a university student who worked on a part-time basis in sales for ABC Electronics. One evening, as Ben was leaving work, he was approached by two police officers and to his astonishment, placed under arrest. Ben was escorted to the police precinct, where he was led into an interview room and greeted by two other men in suits for questioning.

Ben was introduced to Daniel, an attorney and the Director of the ABC Electronics loss prevention division, and Robert, a partner at Robert & Murdock Law. Robert began the interview by telling Ben that their firm was contacted by ABC Electronics to investigate an abnormal pattern of potentially fraudulent incidences that occurred in the store where Ben worked. Robert and Daniel believed that Ben was involved.

Daniel and Robert proceeded to share with Ben their understanding of what had occurred by revealing the specifics of the fraud that was being perpetrated. According to Daniel and Robert, Ben was taking advantage of his position to give unauthorized discounts to his friends by using his employee discount. Once in possession of these items, Ben’s friends were selling the products online for a higher price.

To Ben’s surprise, Daniel had been tipped off through their whistleblower hotline that this fraud was taking place. Daniel immediately followed the company’s fraud response plan and contacted Robert. Daniel and Robert explained to Ben that they had been tracking the frequency of his employee pricing discount purchases over the past three months, as well as his email communications on the office server and the subsequent sales of these items after they were purchased through the employee discount card.

As a result of this mountain of incriminating evidence, Ben was left with no choice, and confessed to the fraud. He was charged with, and convicted of, grand larceny and criminal fraud.

Relevant Evidence:

  • Securing and preserving relevant electronic communications and documents
  • Interviewing the whistleblower and suspected fraudster

To determine whether your organization may be susceptible to fraud, take the following brief survey: