The Association of Certified Fraud Examiners (ACFE) recently published its 2017 Benchmarking Report on In-House Investigation Teams. 1,485 organisations responded to the survey, representing 22 industries across 104 countries. The Report highlights a number of key findings, particularly in respect of the recovery of losses:
- Organisations typically recover only 25% or less of their fraud losses;
- 60% of fraud investigation teams close cases on average within 30 days; and
- 64% of fraud investigation teams don't outsource to third parties.
A further point arising from the Report is the difficulty organisations face in converting a substantiated fraud into recovered losses. 59% of organisations say they recover less than 25% of losses suffered, of which 12% confirmed that they recovered nothing at all from their fraud investigations. The Report explains that this may be because some organisations consider it as being not cost effective to pursue a recovery where the amount lost was relatively small or where the fraudster had spent the money. In relation to prosecution, the Report also identified that 70% of the investigation team respondents confirmed that they refer less than 26% of their substantiated cases for prosecution. There may be a number of reasons for organisations deciding not to prosecute, most notably a desire to shield themselves from adverse publicity.
Alicia Wilson, a Managing Associate in the Fraud Defence team at Mishcon de Reya says:
"Budgetary constraints and competing pressures on investigators' time may mean that fraudulent acts are not detected and acted upon quickly enough or not thoroughly pursued. The Report cites low recovery rates of less than 25% for almost two-thirds of organisations and highlights that many substantiated cases of fraud are viewed as being unsuitable for criminal prosecution. The number of employees within an organisation does not necessarily correlate to the size of a potential fraud and small investigation teams could become overwhelmed by a large and complex case. When deciding how best to allocate an organisation's resources to fraud investigation, management should take into account that instructing experienced professionals from outside their organisation may well provide the speed and focus that are required to secure a successful recovery."
Annabel Thomas, a Partner in the Fraud Defence team at Mishcon de Reya LLP says:
"It is vital for fraud investigation teams to avoid being seen as a cost centre. They should work with management to develop and implement effective fraud prevention and detection systems. In the event of the detection of a fraud, swift and firm action should be taken against the perpetrators, in order to maximise chances of recovery and to discourage any further such conduct. In particular, civil proceedings, rather than a report to the authorities, should be considered as the most effective option in recovering losses and retaining control over the investigation."