This is round two of my “Forensic Lady” blog posts. Still seeking feedback! Without further ado…
Last week I presented a program with M&T Bank titled “2015 Resolutions for Your Business: Be Prepared to Deal with Fraud.” While I spoke on many areas of employee fraud prevention, detection, and investigation, the topic that drew the most questions and comments was fidelity and crime insurance claims. Items to consider:
When an organization initially confirms they have been the victim of a fraud scheme, they should notify the insurance company soon thereafter. It is important to revisit the requirements and terms of these insurance policies. Lack of timely notice may result in lack of coverage.
Did you know that the median loss from occupational fraud is $145,000? Most of the time, organizations do not have a large enough policy to cover the fraud losses I’ve quantified, especially when you consider that $145,000 is just the median and there are plenty of cases that exceed $145,000. The reality is employee dishonesty is widespread but many organizations don’t seriously consider the appropriate level of coverage. There are different types of coverage available from insurance companies. While I don’t endorse any one, herein are hyperlinks to insurance companies who offer more information regarding such coverage.
A forensic accountant’s report can be used as evidence of the loss for the insurance claim and for prosecuting the fraudster. (P.S.-and some policies cover the cost of the forensic accountant) Here’s the tricky part: intent is part of the insurance company’s consideration as to whether the coverage has been triggered. Was there intent to defraud the organization for the financial benefit of the fraudster?
Sometimes there are parts of a claim that are very black and white and others that are grey when considering intent. Here are a few instances of grey areas in a fraud insurance claim: meals, seats at a sporting venue, and credit card use. What rules and reporting mechanisms does the organization have in place to confirm the meal, box seat, or credit card purchase was for business (or, rather, personal) purposes? Sometimes the rules are very loose or non-existent. When these kinds of expenses are included in the insurance claim, questions arise regarding proof the fraudster was personally benefiting and intended to defraud the organization.
If you want to discuss further, please give me a call.
 According to the ACFE’s 2014 Global Fraud Study.