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Do U.S. CFEs need to be licensed as private investigators (PIs)? The answer isn’t particularly straightforward. It depends on the jurisdiction in which CFEs practice and the types of work performed. That could include conducting fraud investigations, internal investigations for their employers, expert witness testimonies, litigation support services or independent white-collar crime investigations. CFEs that practice in more than one jurisdiction may be required to be licensed in some areas where they work but not others.
Fraud Magazine has covered this issue before (“Independent CFEs Need to Check Their Jurisdictions on PI Licensure Laws,” by James S. Peet, Ph.D., CFE, January/February 2012), but we need an update.
Many CFEs who work for private employers — conducting investigations solely on behalf of their employer — assume that only independent CFEs in private practice need to be licensed. That’s true in most states, but eight states that require PI licensure provide no such exception for employees conducting internal investigations on behalf of their employers.
The 2013 Fraud Examiners Manual states, “Fraud examination is a methodology for resolving fraud allegations from inception to disposition. More specifically, fraud examination involves obtaining evidence and taking statements, writing reports, testifying to findings and assisting in the detection and prevention of fraud.” This definition includes many elements that are traditionally associated with investigations, including those specifically included in various state statues that require investigators to be licensed.
Each U.S. state, plus the District of Columbia, has a different set of regulations that govern what defines an investigator or private detective. A few states have no PI regulations at all, but some municipalities within those states have their own regulations that must be observed if an investigation is to be conducted within city limits. Likewise, each Canadian province has PI licensure requirements, Australia requires PIs to be licensed at the state or territory level, but England and Wales discontinued all U.K. PI license requirements.
Some jurisdictions that previously had no licensing requirements have recently passed bills that will require registration and licensing, and others have bills pending that could change current regulations. States earn fees from licensing PIs, and the regulations also give states the power to discipline and limit what non-sworn law enforcement personnel can do while conducting an investigation.
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