5 Steps To Investigating Fidelity Claims
By Rehana Moosa
Published in the November 2012 edition of Insurance West Magazine
Fidelity losses are difficult to investigate because frauds can be complex and hard to detect. Here are 5 steps to keep in mind when reviewing fidelity claims. They will help you review the claims quickly and help minimize the impact on the insured.
- Understand business and accounting system
Identify who performs the accounting duties and the documents generated by the accounting system (invoices, receipts). Walk through sample transactions and document how they are recorded, procedures followed and documents supporting the transaction. Compare normal accounting processes to those used in the suspicious transactions to confirm fraud.
- Understand how the fraud was detected
Start with the transaction that uncovered the fraud. This will help you understand how the fraud was committed and identify patterns (amounts, times, accounts). Suspicious transactions can be compared to the pattern to identify fraudulent entries.
- Identify internal controls
Internal controls are the processes and procedures designed to prevent, detect and correct errors and fraud. Examples include management approval of purchases and keeping cash in a locked area. Compare how the internal controls should operate to the way they functioned at the time of the fraud to help you understand how the fraud was committed.
- Identify repayments made
Ask the insured if any funds have been repaid. Some fraudsters will confess in writing and refer to repayments. Review correspondence from the employee to determine if restitution has been made. These repayments will reduce the claim and are often overlooked by the insured.
- Talk to people
The Association of Certified Fraud Examiners’ 2008 Report to the Nation on Occupational Fraud and Abuse states that employee frauds are most likely to be detected through a tip. Interview anyone who may have knowledge of the fraud (business owners, managers, co-workers).
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Communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. For permission to republish this content, please contact Rehana Moosa Forensic Accounting Professional Corporation.
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