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Procedures against wrongdoing: Bosses will keep losing millions unless they take action

Syedur Rahman of business crime solicitors Rahman Ravelli, talks about why companies will keep losing millions to financial crime unless action is taken.
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Reports that almost half of companies were victims of financial crime last year should not come as a surprise. The situation is unlikely to change unless companies address the problem – properly.

A Thomson Reuters survey of 2,300 global senior business leaders found that 47% have been victims of fraud, theft, money laundering or other financial crime in the past 12 months. The total cost is estimated to be £1.08 trillion.

If white-collar crime is committed in a business and it goes undetected or is simply not investigated properly, there is a good chance it will happen again.

When any company has financial crime carried out against it, an internal investigation must be carried out. If the offence is committed again, questions then have to be asked about the quality of the original internal investigation if one was ever carried out.

Investigations will help determine if a crime has been committed and, if so, who may have committed it. But internal investigations can have a value beyond identifying the wrongdoing and the perpetrator. It can identify the aspects of a company’s working methods that allow an opportunity for business crime to be carried out – and go undetected.

Respond to findings by making alterations to working procedures to design out the potential for crime. Any company that fails to take such action is simply inviting the prospect of white-collar crime through its doors. And with it can come legal, financial and reputational problems.

So a company needs to react when one of a number of triggers for an investigation has been identified. Suspicions of unlawful conduct or criminal activity and/or a criminal investigation are triggers. Others include issues being identified by an employee, discrepancies in transactions, discovery of irregularities in accounting and whistle blower reports.

Plenty of people will say they don’t need to investigate the possibility of offences. Their argument is that it isn’t worth the time and expense. But as this latest survey shows, a failure to act can be more costly and time consuming. If UK businesses fail to recognise the risks by an inability or unwillingness to investigate possible wrongdoing then it will only be a matter of time before more go the way of those surveyed by Thomson Reuters.

There may be some who have suspicions but feel unable to investigate as they lack the necessary skills. This is understandable. But access to such expertise is important. Any rushed investigation or one that is not objective, can damage workplace relationships and even alert the person who committed the offence that they need to hide what has happened.

What companies must also remember is that an investigation cannot function in a vacuum. Any investigation must be prompted by something. Which is why companies need a whistle blowing procedure: one that encourages staff to report suspicions in the knowledge that these will be properly investigated. 

A company’s decision to self-report wrongdoing to the authorities can be a complex task. The advantages and disadvantages must be carefully considered. 

Recent years have witnessed a roll call of huge businesses and financial institutions that have suffered huge fines for a variety of reasons. Rather than having the crime perpetrated against them, they have been the perpetrators – because one or more employees have (either knowingly or unwittingly) not followed the law.

Whether it be Rolls-Royce and bribery, Tesco and false accounting or the failings of some of the world’s largest banks, the penalties have been high – and could have been avoided if problems had been flagged up earlier and investigated.

Such examples must be viewed as reminders of the need to develop a workplace culture that emphasises the importance of reporting and investigating workplace crime. Without such a culture, many more companies will find themselves with tales of woe when they are asked to be part of a survey.

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