Australia: Fraud and corruption: the importance of the first 48 hours

Last Updated: 20 July 2017
Article by David Lehmann

Between November 2016 and April 2017, our team of Forensic experts held roundtable lunches across the country discussing fraud and corruption and the importance of the first 48 hours.

Just like the television series, '48 hours', which highlights the importance of the first two days in a homicide investigation, other crimes such as fraud and corruption should also be acted on quickly, but in a considered, well planned way.

If the response to incidents of fraud and corruption is not carefully considered and planned, the risk of a poor outcome increases significantly. Poor outcomes include loss of evidence, inability to recover assets and the possibility of litigation brought about by the inappropriate handling of a suspect employee.

Between November 2016 and April 2017, our team of Forensic experts held roundtable lunches on this subject in Brisbane, Melbourne, Sydney and Perth. The sessions were attended by professionals predominantly in the corporate sector in roles such as internal audit, risk and compliance, in-house legal and investigation roles.

Participants at our sessions openly shared their experiences and views about fraud and the issues to consider when it does occur. The following is a summary of the outcome of the key issues that were shared during our discussions.

Whistleblowing

  1. Having an effective whistleblowing mechanism is a key corporate governance measure. Participants agreed that an effective mechanism meant that this allowed for two-way communication even if a whistleblower was anonymous. Where two-way communication was possible, it provided an opportunity to obtain further information about the issues reported.
  2. It was important, regardless of whistleblower protection legislation (but particularly due to a lack of it) that corporations must have a commitment to supporting and protecting whistleblowers from victimization and have policies and procedures that clearly state this commitment.
  3. Providing anonymity is essential for whistleblowing to be effective as not all individuals are comfortable enough to overtly report misconduct. Even information provided anonymously may be sufficient to identify significant issues, so it should not be disregarded.
  4. A culture of 'speaking up' is very important and this culture should be demonstrated and promoted by Senior Management and the Board.
  5. Organisations should have a 'whistleblowing committee' made up of several managers from different functions to receive and action reports. Protocols and procedures should be put in place to deal with situations that may involve reports against committee members and senior managers, e.g. the CEO.
  6. It is important to provide feedback to a whistleblower about actions taken by the company to deal with the issues they report. It was agreed that not too much detail should be provided during the early stages of an investigation (linked to 1, above), e.g. 'An investigation has commenced. Contact us again in 7 days for a further update.' The timeframes for providing feedback to whistleblowers should be set out in policies and procedures. This elicits trust in the system, creates a willingness to report misconduct and reduces the risk of whistleblowers reporting issues externally, for example through the media. This often occurs when a whistleblower feels their complaints are not being dealt with, or adequately handled internally.
  7. Some organisations set up their whistleblowing systems by having in-house legal counsel as the designated recipient of whistleblower reports, on the basis that legal professional privilege (LPP) would apply. However, many attendees stated that they did not think LPP would attach to a whistleblower report as it would not meet the predominance test of being prepared for the purposes of seeking legal advice. A participant from one company stated that any subsequent communications with a whistleblower were handled by in-house legal counsel. Other organisations stated that in-house legal counsel would receive the report at the same time as external counsel, so that the issue of LPP could be considered for any consequent investigation at the earliest opportunity.
  8. Care should be taken to select individuals who exhibit the highest ethical standards to receive whistleblowing reports. Training in how to handle and collect information from whistleblowers should be provided to employees with this responsibility.
  9. Claiming LPP at a later, advanced stage of an investigation could be difficult, so deciding about LPP at the commencement of an investigation or preliminary enquiry is a key consideration.

Incident response/procedures

  1. Particularly in the initial stages, only a small group of personnel should be made aware of the incident, i.e. a strict 'Need to Know' basis.
  2. The specific issues should be carefully considered so that rash decisions are not made as they could negatively impact investigation outcomes, e.g. securing evidence and recovering assets. All sources of potential evidence and how to collect it should be considered. The preferred approach is to 'hasten slowly'.
  3. Upward and downward reporting lines need to be established as quickly as possible, and adhered to, so that the flow of information about the incident and response is controlled.
  4. Appropriate planning should be undertaken. In a large organisation, this might be by an investigation committee. This includes, where necessary, using appropriately experienced resources in the planning and execution stages of the investigation. Once the matter has been considered carefully then the agreed approach should be documented in an investigation or action plan.
  5. Be sure that those involved in the collection of evidence have sufficient training and experience in identifying, collecting and recording evidence. Digital evidence should be forensically acquired and the propensity to 'have an initial look' should be avoided as this may impact the integrity of evidence. Physical office searches should be undertaken and these should be appropriately documented, including taking photos and notes of what was done.

Technology

  1. There are myriad data sources that companies should be aware of and that could be valuable sources of evidence, e.g. mobile devices, USB, cloud etc.
  2. The type of issue being investigated will determine what avenues of inquiry are pursued, but all should be considered by those who initially need to know.
  3. There was discussion about employer rights to take possession of and/or obtain and review data held on these devices. It was agreed that appropriately detailed, well communicated policies regarding these rights would assist in supporting employer rights to access data generated by employees. It was agreed that any device issued by the company for business purposes could be retrieved from the employee, with the data they contain being accessed and analysed.
  4. Social media was discussed as being a fertile source of evidentiary material. Again, the importance of having adequate policies and procedures dealing with employee access to social media sites using work assets and on work time was also raised.
  5. It was agreed that when employees in positions of trust resign and leave the organisation, a standard procedure should be that their laptops and other work issued electronic devices (mobile phone, tablets etc.) are imaged. If an issue does arise post departure, then the integrity of the data contained on the hard drive is preserved and can be reviewed as part of an investigation.
  6. Where a senior employee or one who is in a position of trust communicates an intention to depart the organisation, consideration should be given to obtaining a forensic image of that employee's company issued devices at that time and again at departure. (The period between notifying of resignation and departure can be quite crucial in a subsequent investigation).
  7. Whilst the focus was on digital data, a good point was raised about the importance of conducting a physical search of the suspect employee's work area. On many occasions, this has provided very useful evidence. The process of conducting a systematic and thorough office search should be conducted by someone who has experience in doing so. This involves taking photographs before commencing the search, photographing exhibits in situ and where located, and carefully collecting, labelling and securing exhibits.

Conclusion

Our discussions highlighted that serious organisational misconduct such as fraud and corruption is a very emotive and often complex issue. Consequently, there is a tendency to act without sufficient consideration being given to the consequences of those actions.

To reduce the likelihood of undesirable outcomes, hasten slowly and obtain expert guidance, where necessary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
David Lehmann
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.