Having spent almost 30 years investigating fraud, in a variety of guises, I have come to the conclusion that no two cases are ever the same. Every case presents new challenges. The methods used are evolving all the time and, unlike business in general, the fraudster is amongst the first to use new technology in their increasingly sophisticated schemes.

More importantly, it has taught me that to successfully investigate fraud requires a unique range of skills the average lawyer, accountant or investigator, even those with a police background, lack. They often have little or no idea how to investigate and present even some of the simpler frauds let alone complex international cases. However, they do seem to have one thing in common – they will all give it a go, and that is where the problems start.

Often, when I have been called in to investigate a fraud, normally at the 11th hour, my team’s first task has been to sort out the mess made by others who have attempted some sort of investigation. There have been cases where this initial ‘investigation’ (for want of a better description) has rendered the case almost unsolvable.

The main mistakes made by the inexperienced or ill-prepared are;

· An unstructured approach;
· Failure to recognise the limit of their own abilities;
· Evidence overlooked through lack of knowledge or experience;
· Technophobia;
· Over ‘techno-confident’;
· Exhibits rendered inadmissible following inappropriate recovery or handling;
· Poorly conducted interviews.

Sadly, I’ve been asked to help salvage too many situations where the prosecution case has been prejudiced by such actions. From a fee generation point of view I love these cases but on the other hand I cringe at the harm that it does to the image of the fraud investigators.

What is the Government doing?

Unfortunately, despite various government assurances that the investigation industry as a whole will be licensed, the Security Industry Authority (SIA) has now indicated that nothing will happen for investigators until 2006. This actually brings a welcome reprieve for those involved in trying to codify the competence criteria for that sector of the Private Security Industry. I say reprieve because the Investigators Sector Group (ISG) of Joint Security Industry Council (JSIC) has identified over 90 ‘sectors’ of investigation each with a different slant to that envisaged by HM Government when they first introduced the (Private Security Industry) Act.

The SIA has now been left with the unenviable task of defining a competence criteria for an industry so diverse that those at each end of the spectrum fail to even acknowledge each other as being from the same industry. A classic example is the sole proprietor working from his kitchen table handling the occasional matrimonial enquiry to the high fly city based accountant jetting around the world investigating the latest fraud to rock the city or international pension fund. Finding a common competence gets complicated even further when the accountant argues for an exemption purely on the grounds that he’s acting as an accountant not an investigator. However, in my mind once they have crossed the line and start collecting evidence and conducting interviews they too should be covered and not only be able to meet the competence standards set, but should operate under the same constraints and control imposed by the Act.

That said, today we remain totally unregulated, free to set our own standards and more importantly our own ethics.

What is the Fraud Investigation industry doing?

Until recently the UK’s multi-million pound investigation industry has been represented by two bodies, The Association of British Investigators (ABI) and The Institute of Professional Investigators (IPI). Whilst the ABI has always been a trade association, the IPI, which was founded back in 1976 has always placed its emphasis on quality, rather than quantity. Current representation within the Institute membership includes private investigators, in-house corporate investigators and a small number of serving police officers. The Institute recognizes the need for academic and or vocational training but as they cater for such a broad spectrum of the industry its educational program has to be fairly general. Although they are hoping to have their course work NVQ accredited negotiations are still ongoing.

So, when it comes to fraud where do you turn? Fraud is potentially a catastrophic risk for businesses and we need to change the way we manage that risk and how we react to instance of fraud. The complex and international nature of modern frauds requires a whole new skill set from the investigator. It seems a little ironic, considering the size and number of frauds they have had, but the lead has been taken by the Americans who established the Association of Certified Fraud Examiners (ACFE) in an effort to reduce the incidence of fraud and white-collar crime.

With a membership of over 31,000 the ACFE has established itself as a premier provider of anti-fraud training and education. It sponsors more than 100 chapters worldwide including one in the UK, the largest outside the United States and represents many European and African countries where chapters have yet to be established.

The Certified Fraud Examiner
Unlike the situation within other professional groups, the ACFE has successfully broken down the barriers with Certified Fraud Examiners coming from a broad range of backgrounds including professional accounting, internal auditing, law enforcement, consulting, finance, education, information technology, corporate security and private investigation. Within the US the CFE credential has already established itself as the most recognised certification for anti-fraud professionals actively investigating frauds at all levels of business and government.
With the certification being achieved by examination only and maintained through CPE, candidates, as well as having met the minimum education and experience qualifications, have to demonstrate a unique set of skills that are not found in any other discipline; they combine knowledge of complex financial transactions with an understanding of investigation, law, and how to resolve allegations of fraud. Fraud examiners are also trained to understand not only how fraud occurs, but why.

It is hoped that growing acceptance of the CFE qualification will make it easier for victims of fraud to turn to professionals for assistance without entering into the game of chance that has previously existed. The ACFE is committed to maintaining and enhancing the standards of those engaged in the fight against fraud but in the absence of legislation establishing the credentials of those you instruct remains the best protection.

Paul Carratu FIPI, CFE
Managing Director

Paul is the Managing Director of Carratu International Plc one of Europe’s leading Corporate Investigation agencies. He joined them in 1972 and has since specialised in the investigation of fraud in its various forms, including product counterfeiting. He has successfully conducted and managed complex undercover operations and investigations throughout Europe, North America and the Far East and has been commended by both civil and criminal courts.
Apart from his expertise as an undercover investigator he is also acknowledged as an authority on computer related crime and in addition to speaking at commercial venues is a regular lecturer at Loughborough University and Nottingham Trent University’s LLM course in Intellectual Property Litigation for experienced intellectual property practitioners (patent attorneys, solicitors and barristers) run in conjunction with the Chartered Institute of Patent Agents.
He is a Fellow of the Institute of Professional Investigators, and has qualified as a Certified Fraud Examiner. In 2002, Paul was awarded The Institute of Professional Investigators’ inaugural ‘Lifetime Achievement Award’ for his work in the investigation field. In September this year he was elected UK chapter President of the Association of Certified Fraud Examiners.