Internal anti-fraud investigation for corporate compliance
In recent years, the frequent occurrence of enterprise fraud cases and the endless emergence of fraud methods have seriously hindered the development of enterprises, and more and more enterprises have begun to pay attention to the problem of employee fraud and punish fraud. How to carry out enterprise anti-fraud and how to effectively prevent the occurrence of enterprise fraud has become a common concern.
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The current situation of corporate fraud
What is fraud
The American Association of Certified Fraud Examiners (ACFE) defines professional fraud as "taking advantage of a person's position of authority for personal gain by intentionally misusing or abusing the resources or assets of an employer." The Asian Audit Organization's Anti-Fraud and Corruption Guide defines fraud as "intentional deception, concealment of facts and material information in order to obtain an unfair or unlawful financial advantage". China's Auditing Standards for Certified Public Accountants No. 1141 - Liability for Fraud in the Audit of Financial Statements defines fraud as: "It refers to the intentional behavior of the management, management, employees or third parties of the audited entity to obtain improper or illegal benefits by deceptive means." In practice, the fraudulent behavior in the enterprise usually refers to the behavior that the employees violate the interests of the company by taking advantage of the position convenience brought by their position status in the enterprise.
The harm of fraud
According to the ACFE's biennial Global Job Fraud Report 2022, the report is based on a statistical analysis of 2,110 cases from 133 countries and 23 industries, including fraud cases involving direct economic losses of more than $3.6 billion. From the perspective of the distribution of fraud, job fraud is mainly concentrated in these four departments: operation department (15%), financial department (12%), administrative leaders/senior managers (11%), and sales department (11%). In addition, the majority of fraud cases, from the time of the crime to the investigation, took 12 months, and each case resulted in an average direct financial loss of $8,300 per month. Corruption and bribery remain the most common methods of fraud worldwide.
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Precautions for anti-fraud compliance investigation
In practice, the main malpractices that often occur in enterprises are: first, position encroachment, such as employees taking advantage of their position to directly embezzle or embezzle company property, such as taking the company's finance that they are responsible for keeping as their own, falsely issuing invoices to the company for reimbursement; The second is connected transactions, such as employees themselves or in the name of relatives and friends to establish a company, establish connected transactions with the company, carry out improper business relations, infringe on the interests of the company; The third is commercial bribery, employees use the convenience of their positions to ask for, receive kickbacks or other forms of "good fees" from relevant trading parties; Fourth, disclosure of trade secrets or infringement of intellectual property rights, such as disclosure, use, licensing others to use the company's trade secrets or infringement of the company's copyright and other intellectual property rights, damage the legitimate rights and interests of the company, and gain benefits for themselves. Therefore, the author believes that there should be some differences in anti-fraud compliance investigation measures for different fraud behaviors, and the following points should be noted:
About the survey plan
Before the investigation is carried out, it is recommended to formulate an investigation plan, and when formulating the investigation plan, the investigation subject, the investigation content, the investigation direction, the investigation approach and the investigation scope should be considered. For example, in the direction and content of the investigation, different charges, the elements of crime construction are different, and the investigation direction and entry point are different. For example, the investigation direction should focus on the financial accounts, transaction contracts, reimbursement bills and other documents related to the perpetrator. In terms of behavior, whether it has taken the illegal possession of enterprise property by theft, cheating or embezzlement, so the investigation should be carried out around the facts of theft, cheating or embezzlement. In addition, the behavior of concealing income, fictitious expenditure or directly encroaching on the property in custody is also a typical way to achieve duty encroachment in practice, and gambling, debt repayment, personal consumption is also the main destination of funds involved in duty encroachment cases, according to the specific circumstances of the case, the comprehensive development of the plan.
In addition, enterprises sometimes have their own starting points and priorities, for example, some require recovery of stolen goods, some want to punish crimes, investigate criminal responsibility, some want to eliminate work gas, and some want to improve the corporate compliance system, so the investigation program must be flexible and effective.
About interview work
Interviewing the parties suspected of fraud is an important means for enterprises to obtain clues and restore the truth in anti-fraud work. Even at the beginning of the interview, both parties may test each other's cards. Therefore, the interview is not just a simple question and answer session, it needs to be carefully planned. For example, a conversation group can be set up before the interview, which can be composed of the project leader, auditors, legal affairs, lawyers and other personnel involved in the interview, to determine the conversation objectives, make the conversation outline, and clarify the division of labor. The talking group can also start from the aspects of law, morality and reason, create a suitable talking atmosphere, and grasp the opportunity to present evidence, and finally achieve the goal of talking. At the same time, in the process of investigation, if there are many people under investigation, they should be divided into groups and interviewed at different places at the same time to avoid information exchange, mutual protection and communication of reply contents. If sequential interviews are used, the order of interviews should be carefully considered, and whether to conduct interviews outside the office location should be carefully considered.
It should be noted that, in fact, interview is a "double-edged sword", and various corresponding plans should be made. If the experience is insufficient or the operation is wrong, the person under investigation is likely to resist the investigation, destroy the evidence, or even resign, so that the investigation is deadlocked. Therefore, the conversation should be relaxed, to know how to apply pressure, when to seize the victory to pursue, but also to master certain conversation skills.
Pay attention to the legality and objectivity of collecting evidence
Enterprise anti-fraud investigation is different from criminal investigation activities. The investigation work is not mandatory for the investigated persons, that is, the investigated persons have no obligation to cooperate, and the anti-fraud investigation will inevitably come into contact with the business secrets of the enterprise and the personal information of the relevant personnel, so the legitimacy of the investigation activities is closely related to the qualification of the investigation subjects and the legitimacy of the investigation methods. Therefore, investigators should not only have an understanding of economic crimes in relevant fields, but also grasp the boundaries of crimes that violate citizens' personal rights, otherwise a slight mistake may bring legal risks. For example, it is prohibited to extract statements by illegal means such as violence, threats, inducement, deception, etc., and it is not allowed to illegally detain or deprive the person under investigation of his or her personal freedom by other means; It is prohibited to detain personal items such as electronic devices of individuals under investigation; The business secrets of the enterprise, the business secrets of the relevant partners and transaction objects and the personal information of the employees that are learned in the course of the investigation shall be kept confidential and shall not be disclosed or used for other purposes. Investigators should correctly clarify the scale and boundaries of investigation behavior, improve legal and safety awareness, and ensure
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Strengthen enterprise anti-fraud prevention and control management
Most enterprises deal with fraud problems with the characteristics of "lag", that is, they take emergency relief measures after discovering fraud problems or major losses. At this point, any action taken by the company is a remedial measure, not a preventive one. In the "Basic norms for Enterprise internal control", it stipulates the "key points of concern for enterprise anti-fraud" : enterprises should establish an anti-fraud mechanism, adhere to the principle of simultaneously punishing and preventing, focusing on prevention, clarify the key areas of anti-fraud work, key links and the responsibilities and powers of relevant agencies in anti-fraud work, and standardize the reporting, investigation, processing, reporting and remediation procedures of fraud cases. Enterprises shall at least take the following situations as the focus of anti-fraud work: (1) Unauthorized or other illegal means to seize and misappropriate enterprise assets for improper benefits. (2) the existence of false records, misleading statements or major omissions in financial accounting reports and information disclosure. (3) Abuse of power by directors, supervisors, managers and other senior managers. (4) The relevant institutions or personnel collude in fraud.
Therefore, anti-fraud compliance is a very key link in the construction of enterprise compliance, and the establishment of an effective anti-fraud compliance system is also a key starting point and an important basis for cutting corporate responsibility and employee responsibility. At the same time, enterprises should also pay attention to the following matters in the process of building an anti-fraud system:
Formulate a sound enterprise anti-fraud compliance management system
The establishment of anti-fraud compliance system is a top-down work, which requires the advanced concept of compliance management from the management of enterprises, which is exactly what many enterprises lack most. Judging from the current construction of anti-fraud compliance system, enterprises in Internet-related fields have a compliance management concept that is ahead of other industries, and have established a relatively complete compliance management system with industry characteristics. Therefore, enterprises should formulate or improve the enterprise anti-fraud compliance management system according to their own governance structure and management mode, institutionalize the purpose of enterprise anti-fraud compliance management, departmental responsibilities, risk identification, preventive measures, departmental linkage, reporting and supervision mechanisms, and provide policy support for enterprise anti-fraud compliance management.
Focus on the establishment of a continuous supervision mechanism, through self-assessment, internal audit, internal and external reporting and other ways to continuously monitor the effectiveness of internal control
Generally speaking, an independent and effective internal audit function can assist the management to continuously supervise the internal control system of the enterprise and deter potential fraud. However, according to the Global Workplace Fraud Survey 2022, about 42% of fraud is detected by reporting, which is almost three times more than the most commonly used method (internal audit), and more than 50% of the reporting comes from employees. At the same time, a large number of cases come from external parties, suppliers, customers and competitors are important sources of information. Therefore, the establishment of a good reporting and complaint mechanism, smooth reporting and complaint channels, and actively and effectively deal with reporting and complaint matters are extremely effective and low-cost ways to detect and prevent fraud. In this regard, it is recommended that enterprises build convenient and efficient reporting channels, such as setting up reporting email addresses or reporting telephone numbers. The company should also have a clear system and investigation body for how to handle reports received.
Conduct regular anti-fraud training to enhance anti-fraud awareness
Compared with the establishment of a complete compliance system, the time and economic cost of compliance training is significantly lower, and it also has a certain preventive effect. Enterprises can improve the anti-fraud awareness of enterprise personnel and create an atmosphere of clean government by inviting external experts to train employees, management and key staff on a regular basis. At the same time, through the explanation of criminal law charges and typical cases, employees can understand the common circumstances of fraud, the identification of fraud risks and the seriousness of the harm and consequences of fraud, strengthen education and warning efforts, promote the awareness of abiding by the bottom line, and integrate the concepts of law, compliance and integrity into the corporate culture.
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