Closing The Loop
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"Oh what a tangled web we weave, When first we practice to deceive†- Sir Walter Scott
Unraveling complex internal fraud schemes can be exceptionally challenging. As my fellow countryman puts it, the "web" that fraudsters weave can be relatively logical or completely unstructured and seemingly random.
Most internal fraud investigations involve an interrogation of the suspect(s) to determine guilt or innocence. During my career, I have been lucky enough to conduct hundreds of interrogations (or as HR likes to call them "interviews"). I have had the privilege of learning from many highly trained interrogators from local, state and federal law enforcement. Very early on in my fraud career, they taught me a very valuable interview approach that I believe many interrogators neglect to utilize. The approach, if used appropriately, can "close the loop†and dramatically improve a bank's ability to prevent internal fraud.
An interrogation with a fraud suspect involves many phases including establishing a baseline, information gathering, the confrontation, the confession etc. However, once a confession is provided by the employee many investigators stop the interview, suspend the employee and return to the office. That is a mistake.
The employee has just admitted their role in the scheme. Often, employees appear almost relieved. Certainly, some are distraught, others may be aggressive, but for those that express a sense of relief, now is the time to truly help the bank stop more fraud.
Consider asking the relieved employee the following types of questions:
- Why did they commit this particular type of fraud?
- When did they figure out that the fraud would be easy to perpetrate?
- Which internal controls did they bypass / ignore to commit the fraud?
- How did they keep the fraud hidden from the colleagues / manager?
- Does anyone else in the bank know about the fraud? Are they also involved in committing fraud?
- What do they recommend that the bank do to stop this type of fraud from happening in the future?
- How long did they expect it would take for the bank to detect the fraud?
Not all employees will cooperate, but for those that do, the information that they provide can be exceptionally valuable. As mentioned, I have personally used this approach often. It did not always work, but I can recall one particular interview where the "post-confession" questioning approach proved highly successful. Without providing specifics here, the employee took great pride in relaying the entire fraud scheme from conception to completion. They were immensely proud of their ability to outsmart their manager, as well as all of the various departments tasked with stopping fraud.
I summarized the employee comments in a memo that ultimately triggered the implementation of robust controls and detection reports that almost completely eradicated that particular type of fraud. The fraudster's words carried a tremendous amount of weight with senior management. After all, they had dedicated many months to perfecting the fraud. Why should we not learn from their hard work?
Have you used the "post-confession" approach to help your bank improve its ability to detect and prevent internal fraud?