Occupational fraud is a crime generally committed by employees against their employers. Ironically, employees also are most likely to notice or suspect occupational fraud schemes conducted by their coworkers or managers. Whether they report through an anonymous tipline or directly to management or HR, rank-and-file workers often are the first to raise the alarm.

If an employee alleges that someone has committed theft or fraud, or simply exhibits suspicious behavior, it’s your responsibility to take the charges seriously and investigate them. Here’s how.

Preliminary digging

If you receive a fraud tip, you’ll need to assess its validity by conducting preliminary interviews — even if you plan to eventually turn the investigation over to legal and fraud experts. To help avoid unnecessary legal complications, keep details of any allegation private, particularly the identities of the accused and the accuser.

Assure workers involved that the investigation will be held in strict confidence and inform them that they can’t discuss any part of the process with anyone outside it. Remind managers that they need to have all conversations behind closed doors, store all meeting notes securely and speak only to those people who are necessary to the complaint investigation.

One-on-one interviews

When you sit down with the accuser, the accused or potential witnesses, start with an opening statement that describes what’s being investigated and then ask open-ended questions that encourage employees to say more than “yes” or “no.” Ask all interviewees the same questions so that you can compare answers, identify patterns and uncover discrepancies. Also, have a witness present to verify what was said and what occurred during the interviews.

Keep an open mind while gathering facts. Just because an employee has a reputation around the office as a “troublemaker” or “crank,” doesn’t mean that person is lying or guilty of an impropriety. If an interview seems to veer into dangerous territory — for example, an accused individual claims harassment or asks about legal rights — contact your attorney immediately. Also consider allowing a third-party investigator, such as a fraud expert, to handle future interviews. This can help preserve impartiality and show all parties that the investigation is being taken seriously.

Tying up loose ends

You’ll want to keep detailed notes on all the steps of your investigation. Include the dates and times of workspace searches, computer forensic activity and conversations. After every interview or action taken, review your notes to ensure they capture all relevant information.

Even if your investigation turns up no evidence of misconduct or criminal behavior, you’ll need to follow up and close the loop with those involved. When complaints are found to have merit, take appropriate action as quickly as possible. You may be able to handle some minor issues with in-house personnel. But consult legal and financial advisors — and possibly law enforcement — if a crime seems to have occurred or you detect financial losses.

Document your policy

So that workers know what to expect if they make a complaint — of any kind — detail the resolution process in your employee handbook. Just make sure your managers understand and adhere to anything you put in writing.

(This is Blog Post #1549)