Fraud investigations gone wrong

When conducted properly, fraud investigations are critical to uncovering illicit activities that can have significant consequences for individuals, organizations and society. The Association of Certified Fraud Examiners’ (ACFE) Code of Ethics requires Certified Fraud Examiners (CFEs) to exercise diligence and professionalism during investigations. A poorly conducted investigation not only erodes public trust in investigative bodies and the justice system, but it can also embolden fraudsters to continue their illegal activities. (See “Code of Professional Ethics,” ACFE.)

People wrongfully accused of fraud or implicated in fraud investigations can face significant personal and professional upheaval. They endure reputational damage, loss of employment, financial strain and even incarceration.

For organizations, a poorly conducted investigation can undermine their credibility and viability, resulting in reputational damage, financial losses and erosion of public trust. The resources that organizations expend in defending themselves against unfounded allegations (legal fees, investigative costs, internal restructuring) can strain finances and efficiency.

High-profile cases of flawed investigations may shake public confidence in law enforcement agencies, judicial institutions and the broader legal framework. The failure to hold accountable those responsible for investigative misconduct or miscarriages of justice can undermine public faith in the accountability mechanisms designed to safeguard against abuses of power. This column examines two instances of fraud investigations gone wrong and what could’ve been done differently.