Investigating the fraud and obtaining evidence

It is important to quickly establish broadly what actually occurred. The full evidence may not be easily available, but often the better the quality of the evidence the more likely a successful civil recovery will be made. Evidence might be physical in nature (documents and electronic material) or witness testimony. The fraud should be investigated without notifying the fraudster. Particular issues will arise if the fraudster is an employee of your business.

Often, it will be ideal if a team of professionals with complementary skills investigates the fraud and assists you to seek a recovery order. An investigation and recovery team may comprise some or all of the following:

• An in-house team (for a business) (but if senior management failed in their duties to prevent the fraud, it may be appropriate to omit the senior management from the team)

• A solicitor

• A forensic accountant

• An insolvency practitioner

• An investigator

• A computer forensic specialist

 

A key element of the investigation process will be to determine with your solicitors what legal claims are available to you and/or your business, and against whom and 

in which courts and countries these claims should be brought. Defendants might include the suspected fraudster and others who have assisted in the commission of the fraud. In general, it is only worthwhile pursuing defendants who you are confident have sufficient assets available against which you will be able to enforce a favourable recovery order obtained in due course.

You should secure evidence (physical and witness testimony) with the assistance of legal advice to ensure that it is admissible in any court proceedings. In particular, documents, images of computer drives, mobile phones, etc should be obtained on a forensically sound basis.

Disclosure orders may be obtained to require an organisation to release information relating to the fraud or the fraudster’s financial affairs. They are a very effective and important method of investigating fraud. Many countries recognise the importance of third-party disclosure. Disclosure orders may be obtained against, for example:

• Internet service providers and telephone/courier companies, to discover the identity of a fraudster; and 

• Banks, company formation agents or creditors of the suspected fraudster, to locate assets against which a subsequent recovery order can be enforced.

You should also consider taking steps to preserve remaining assets and to prevent further fraud. For businesses this may include consideration of the business’s financial position and making notifications to third parties such as your insurers, regulators or the police. It may also be necessary for a business to establish that it remains solvent.