Corporate internal investigation: how to discover a fact of comitting offence?

How to discover a fact of committing an offense and determine the need for conducting an internal investigation?

It is necessary to understand that any offence leaves traces.
When it goes about offenses committed out of mercenary motives, such as theft or fraud, these can be detected via analysing accounting and financial reports, information about contractors, and procurement documents. Signs that may testify an offense include discrepancies in the original documentation, disappearance of documents, discovery of agreements concluded with fictitious companies, making uncoordinated payments, as well as groundless increase in expenditures or materials used in the production.

It is more difficult to establish the facts of unlawful extraction of information. Usually, if a leakage of valuable information takes place, the company will discover this after the information is used.

The matter of the need for conducting an internal investigation depends on the situation. The decision is made depending on the set of signs indicating the commission of an offense.

Is it possible to build a mechanism for detecting offenses?

Such a mechanism can and must be built by every medium-sized and large company.
Due to the increase in the number of operations and staff in the process of enterprise development, it becomes more and more difficult to control this enterprise; the number of opportunities for abuse is increased accordingly. Therefore, the company must have a system of documents clearly regulating all internal business processes. Such documents are issued in the form of regulations, procedures, or instructions, which are subject to approval by the order of the head of the company and must be communicated to employees. It is necessary to provide for the competences of each position, the procedure for making decisions and their approval, the procedure for the use of funds, etc. Violation of the established rules will testify the existence of the risk of an offense to be committed.
Moreover, each enterprise needs to have available control mechanisms. Company officials should be vested with appropriate authority. Conducting regular audits is an easy way to exercise control.

Introduction of compliance policies at the enterprise to prevent actions that can be qualified as corruption deserves particular attention. Currently, all large foreign companies operating in Ukraine have such anticorruption programs and a special commissioner who controls their compliance.
A telephone or email hotline, through which any employee can anonymously contact a competent person and inform them about a violation, is a relatively new tool for Ukraine.

The company’s security service plays an important role in detecting offenses. The competences of security service officers include the matters of establishing a reliable and efficient system for preventing, detecting, and terminating offenses, as well as minimising repercussions. Such a system should be primarily aimed at ensuring economic and financial security and contribute to the successful business development.

As a result, we have a list of tools for detecting and preventing unlawful actions. However, we need to remember that this system should be flexible; it should also be constantly changed and supplemented in order to increase the level of the company’s protection from unlawful actions.

For instance, one has discovered that an offence, such as fraud, was committed. What should a manager do in such a situation?

If there are reasonable grounds to believe that the offense has been committed, the manager should immediately:

1. Stop working with assets used during suspicious events: conducting financial transactions, alienation of property, or conclusion of corresponding agreements;
2. Limit the competences of persons, who may be involved in the commission of unlawful actions;
3. Restrict access to information regarding suspicious events;
4. Document suspicious events and ensure preserving of their traces.

If the above measures are not taken, there is a high probability of harming the company’s interests. It is always better to prevent damage than try to obtain compensation afterwards.

In the future, one makes a decision about the need for conducting an internal corporate investigation.