Context
Today more than ever, in these times of health crisis (cf. our article ” Crime and COVID-19 : http://owfmamzyv.preview.infomaniak.website/non-classe/criminalite-economique-et-covid-19-mieux-vaut-prevenir-que-guerir/), companies are victims of economic crime (theft, fraud of all kinds, cybercrime, unfair management, fictitious employment, embezzlement, corruption, etc.), whether from their employees, at all levels of the hierarchy, or from third parties. Already in 2016, a PricewaterhouseCoopers (PWC) study mentioned that more than 35% of the companies surveyed reported having been victims of economic crime in the previous two years(https://www.pwc.ch/en/publications/2017/global-economic-crime-survey-2016-pwc-en.pdf), which shows the importance of the phenomenon. PWC also indicated that one in ten economic crimes is discovered by chance. However, the introduction ofwhistleblowing systems has encouraged investigations within companies themselves, in order to verify the facts reported.
Importance of reacting as quickly as possible
In the event that economic crime is identified or even suspected, it is important for the company to decide early on whether it needs to carry out an internal investigation. The reputation of the company can be damaged if a late reaction is noticed (flaws in its internal organization, laxity in the face of irregularities, failures in the protection of its data, …), its criminal responsibility can even be engaged. Above all, the sooner the company plans to manage the case, the greater its chances of recovering potential losses caused by the fraud and reducing its damaging consequences.
Role and importance of an internal investigation
The internal investigation of corporate fraud is essential to detect, interpret and consolidate the evidence it provides, especially in complex cases.
It allows to support a possible decision to undertake or not a legal action and, if necessary, to reinforce the latter by bringing sufficient evidence to the different authorities concerned. Internal investigation therefore plays a central role in the management of a corporate fraud.
Who is best placed to conduct an internal investigation ?
In order for an internal investigation to provide evidence that can be used in legal proceedings, it is important that it is carried out in an irreproachable manner and within an adequate and strict legal framework. In addition, it must be conducted in an impartial manner and in such a way as to avoid collusion between potentially involved employees and the destruction of evidence.
In this respect, companies are increasingly calling on independent consultants who will carry out the internal investigation. Indeed, the intervention of an entity external to the company allows the latter to ensure that the analysis of the fraud is carried out in a neutral manner, within an adequate legal framework and avoiding any conflict of interest or interference of the company in the investigation process. This is essential for the image and reputation of the company, as it cannot be accused of having conducted a biased internal investigation.
However, in some situations – particularly those involving the physical integrity of individuals – there will often be no time to plan and conduct an internal investigation. In these particularly sensitive cases requiring a rapid reaction, the authorities should be immediately seized. A close collaboration between the company and the authorities must then be put in place. In these cases, an independent consultant can be mandated, not to carry out an internal investigation, but to support the company in the implementation of its strategy to defend its interests in a potential procedure against it.
The different stages of an internal investigation
In general, an internal investigation is a 9-step process :
In addition, throughout an internal investigation, a cycle of 4 steps is carried out in a recurring manner :
Internal investigation as a means of preventing future cases of fraud
An internal investigation often allows the identification of gaps in the company’s organization that may lead to the realization of potential or proven risks. It is precisely these shortcomings in the organization of a company that allow it to be held criminally liable when offences are committed within it or in connection with its activities.
If necessary, in the interest of the company, the internal investigation will make it possible to issue recommendations concerning the implementation of changes and improvements to its organization and the introduction of processes to strengthen its internal control system (ICS).
Indeed, a strong correlation exists between the risk of fraud and the quality of a company’s ICS. An adequate ICS can therefore reduce the occurrence and consequences of fraud on the one hand (cf. Financial fraud and internal control in companies: the importance of an efficient ICS to optimize the identification of fraud risks and reduce their probability of occurrence ; Bachelor’s thesis ; Eric CASTRO ; HEG ; 2016 : http://doc.rero.ch/record/277966) and to engage the criminal responsibility of the company on the other hand.
Conclusion
Especially in the context of internal frauds, companies should engage external consultants to perform the necessary internal investigations. Indeed, investigation plays a central role in the fraud management process, notably by supporting the decision to initiate or not an eventual legal procedure. An external consultant allows the company to ensure that the investigation is carried out in a confidential, impartial manner and within an adequate legal framework in order to provide evidence that can be used in a subsequent legal action.
Penalex Avocats SA offers a complete interdisciplinary and tailor-made investigation service in the field of economic crime. We advise you to visit our web page dedicated to this service : https://www.penalex.ch/analyse/criminalite-economique-et-covid-19-mieux-vaut-prevenir-que-guerir/.
