Investigation and disciplinary process – Common pitfalls

Investigation and disciplinary process

Common pitfalls in investigation and disciplinary processes.

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Senior Manager (Forensics)

KPMG in Namibia

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"It takes less time to do a thing right, than it
does to explain why you did it wrong."
– Henry
Wadsworth Longfellow

Namibia has seen its fair share of fraud and misappropriation related matters, but what has stood out is the number of instances where alleged suspects have walked scot-free. These have been mainly due to:

  • Investigative processes that have not been in conformance to the policy
    or legal guidelines;
  • The destruction/contamination of evidence; and/or
  • Disciplinary process that is inconsistent to the policy and labour laws.

In the Namibian context, these factors have been discussed in the ensuing paragraphs.

Investigative process:

The crux of any fraud related matter is the investigative process that follows to confirm or refute the allegations raised, by way of collection and analysis of factualinformation. Often there is such an urgency to get to the end result / product, that due process is ignored, forgotten or circumvented. Technology is making fraud and collusion easier which only further emphasise the need for an evidentially sound investigation process. The common issues that occur are:

  • Investigations being carried out by individuals that lack forensic
    investigative knowledge and qualifications; and the legal aspects that need to be adhered to. It is common for internal auditors or management to carry out investigations within an organisation. Whilst this might help in saving costs in the short run, in the long-run it might have damaging consequences both in terms of cost (to
    re-investigate) and reputation. Though internal investigators are competent, often the focus is different – root cause analysis / stop loss, as opposed to criminal / civil action. As per the KPMG 2014 Namibian Internal Audit survey, 46 percent of the participants responded that their internal audit department conducts forensic investigations and only 25 percent of these had the necessary
    qualification or experience;
  • Failure to recognise the legal and policy guidelines governing the –investigative process, rights of the employee, admissibility of the evidence, subject matter experts, etc.; and
  • Lack of independence during the investigative process – very often questions have arisen on the independence of the investigator (especially if it’s the organisation’s management conducting the investigation), as a case of guilty-before-proven-innocent is potentially assumed. As a matter of interest, as per the ‘2016 KPMG Global Profile of a Fraudster’ survey, 65 percent of fraudsters are employed by the victim organisation and a further 21 percent are former employees. Hence the situation of one investigating their current/former colleagues is a real possibility, especially in the Namibian context, which all-the-more makes independence critical.

Destruction/ contamination of evidence:

Factual evidence should always be the basis of a forensic investigation and hearsay must not influence the review process. The common pitfalls noted in this area are:

  • Evidence being gathered by unlawful/illegal means, which, in most
    cases, makes it inadmissible and unusable. An investigator needs to take into account the Namibian Constitutional rights, civil and criminal laws (e.g. Chapter 24 of Criminal Procedure Act 51 of 1977);
  • Evidence being contaminated as due process of collection is not followed. This is especially relevant to computer data evidence which need to be gathered in a specific manner in order to avoid contamination and risk of tampering. The evidence in these instances very often become inadmissible on technicality grounds;
  • Chain of custody of evidence not being maintained accurately, specifically in litigation related cases; and
  • Evidence being destroyed as the same was not maintained in proper evidence bags/files and in locked safe.

Disciplinary process

The investigative process culminates with a report and, if sufficient evidence is found that confirm the allegations, disciplinary hearings and/or litigation proceedings occur thereafter. With regard to internal disciplinary processes, some of the common pitfalls are:

  • Employee suspensions and hearings being conducted in non-conformance to the organisational disciplinary and fraud polices;
  • Forensic investigation reports not fact-based and backed by supporting documentation;
  • Non-existent policies or unsigned/ obsolete policies; and
  • Process followed not in adherence to Namibian Labour law and Constitution.

It is extremely critical to conduct investigations right the first time, especially given the risk of losing evidence and also because of the costs involved in such a process. Namibian newspapers have reported significant examples where investigations and suspensions have been challenged successfully on the basis of a technicality.

© 2017 KPMG Advisory Services (Namibia) (Pty) Ltd, a Namibian company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The information contained in this newsletter is of a general nature and should not be used or relied upon as a substitute for detailed advice or as a basis for formulating business decisions. Please contact the writer for advice relating to your specific circumstances. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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