Recovery in instances of fraud – just what occurs?
The true costs of fraud only become apparent when such issues are made public, but estimates put the cost of such behavior to the UK economy at billions of pounds.
When major fraud is discovered, the companies involved are often forced to enter into insolvency proceedings which reduce the likelihood of civil asset recovery.
At the same time, this often increases the difficulty in tracing and recovering assets that are diverted, although a combined approach using both insolvency and forensic resources can provide a better route for recovery.
Discovering fraudulent activity can often only come to the fore when a company enters into formal proceedings as the books and records are then exposed.
When placed under external scrutiny, discrepancies can become evident and the diversion of funds spotted.
In other instances, such fraud can see the process of insolvency sped up to ensure that further losses do not occur before any action is taken.
Starting on the road to recovery
The first steps are often undertaken by insolvency experts and forensic investigators, who will carry out a business review to identify any potential risks relating to client lending.
Understanding how any fraud is occurring is a vital part of the process as any delay could allow the perpetrator sufficient time to falsify or destroy any incriminating records.
An Insolvency Practitioner would secure the documents and then the process of tracking fraud can be carried out – tracing back losses which occurred many years previously in some cases.
Identifying those responsible and working out how fraud is carried out is just the beginning of the recovery process though.
Forensic IT technology can trace deleted files that can provide further material to an investigation so doing this in a timely fashion is of vital importance.
This is all important in the process of getting those responsible brought to justice, while other disadvantaged creditors may take such actions to protect their reputation in the market place.
The main focus is usually on the recovery of lost assets, and forensic accounting services will often be the first step in achieving that.
By Phil Smith