Accreditation for fraud investigators

scandal but, if asked to define exactly what happened there, most of us would be a little unsure. Clearly, the headline news was that Enron lied about its profits in order to maintain share price, dividends and customer confidence using deceptive methods which, if the material outcome wasn’t bad enough, were in themselves seriously criminal in intent.

The company was eventually forced into bankruptcy in December 2001.

That Enron’s false accounting wasn’t spotted sooner has prompted the accounting industry to take a long, hard look at itself. It has become evident that the term ‘aggressive accounting’ applied not just to Andersens – one of the world leaders in auditing which collapsed after its role in destroying the evidence was finally discovered – but also to many other American auditing companies whose work had evolved towards unethical practice in what is a competitive marketplace.

The question which has played around the lips of City analysts in the Capital is: “Could it happen here?” The answer is that it could.

Results of company collapses like that of Enron are hard to define. There are the lost jobs, the closed premises, wound-up pension schemes and a customer base that’s left high and dry. Those occurrences are bad enough, but it’s the implications of the failure which affect the underlying economy and perpetrate the real damage.

Suspicion, a breakdown in trust, loss of confidence and the risk aversion resulting from these softer emotional impacts can destroy far more than the businesses of two poor performers. A whole economy might lose heart if there’s no guarantee of integrity or expectation of probity. Business is risky enough without the added factors of Enron and Andersens. And a loss of impetus and energy in the City reduces the vitality of the marketplace, driving up the cost of living for every man, woman and child in the country.

Internal fraud protection
Here in the UK, one facet of internal fraud protection has enabled the private and public sectors to coalesce their thinking on this subject with a view to ensuring that employees (and, by extension, company directors) can be investigated in the event that there’s even the slightest suspicion of fraud. The result is a partnership between the Metropolitan Police, the City of London Police and the Confederation of British Industry – namely the Accredited Fraud Investigators’ Scheme.

To be launched in the near future, the scheme is based on four very simple but entirely germane elements: personal integrity, formal investigative training, threshold qualifications and investigative work experience. Let’s take a look at each in turn.

In terms of personal integrity, the applicant is measured on background, personal disclosures, the Criminal Records Bureau check and other methods to determine their suitability for being employed in such a sensitive and ethical position of trust. Of great importance is the use of a points system, rather like that which the Security Industry Authority (SIA) will employ in licensing, and the fact that this scheme will be subject to amendment once the SIA’s licensing criteria for private investigators are known. This scheme will only match or exceed those criteria.

The Accredited Fraud Investigators’ Scheme is a joint initiative between business and the police which serves as an excellent example of structured partnership. It should improve the chances of a successful prosecution

As far as formal investigative training is concerned, an applicant must demonstrate core competencies including a comprehensive understanding of current legal Acts and procedures, skills in both investigative and search procedures (encompassing the handling of computer-based evidence) and the aptitude to perform competently in a Court of Law. An important facet of this skills measurement is the ability to conduct investigative interviews to the very highest evidential and procedural standards.

For the threshold qualifications, prior academic and/or practical experience are evaluated with a focus firmly on operational capability. Highly experienced non-graduates can make the grade, but the emphasis is on a combination of formal professional achievement and significant experience.

Last, the minimum requirement is for 1,000 hours of investigative work experience within the previous two years. This will normally be assessed against a comprehensive set of references.

Qualified, experienced professionals
The result of this thorough and far-reaching evaluation (which starts with a rigorous interview process) is the selection of a qualified, experienced, mature professional who can prove that his or her credentials are above board, and who can enter into a complex investigative process with the full authority of an external, independent evaluation body. In the case of the Accredited Fraud Investigators’ Scheme, the partners have placed responsibility for this evaluation firmly in the hands of the National Security Inspectorate.

So how far will the scheme go in reducing our exposure – as a social marketplace – to the inadequacies of the system which was uncovered in the USA? There’s not a security system in the world which cannot be defeated by the application of resources and intellect. If man can devise a protection system, another man can then unpick it.

That said, this scheme isn’t designed to be a panacea for all ills right from the word ‘Go’. What it does do is to separate conflicts of interest by making the selection of people hired to uncover fraud both transparent and subject to independent review. In the case of Enron, the difficulty in finding a qualified and independent investigator nearly stopped the trial proceedings on more than one occasion.

Source of all knowledge
The scheme ensures that investigators have proved they’re able to do their job properly. In a legal minefield, such as that surrounding fraud, this particular skill is essential. The scheme also provides a ready source of professional knowledge which can be deployed as required, time and time again, no matter how many or how few cases are under investigation.

The Accredited Fraud Investigators’ Scheme cannot guarantee 100% success, but it does provide a solid foundation upon which much can be built in the future. This year, the scheme will begin initially within the confines of the M25 region.