Corporates turn to ex-govt sleuths as frauds increase

MUMBAI: “So what exactly did you say to him?” asked the CEO of an automobile company to a forensic investigator who had casually walked out of a room after interviewing an employee accused of taking kickbacks.
Investigators had unearthed suspicious transactions but were unable to pinpoint where the money was parked. The investigator, who is associated with a large consultancy, said he simply stood over the employee and stared him down for a few minutes, and the latter spilled the beans. “I did not say a word,” laughed the investigator, who until two years ago was an officer with Mumbai police.

As corporate frauds rise and investigations get more complex, major professional services firms are taking on more former law enforcement officers—whether from the police department, ED, CBI or Customs.
‘Training for intel gathering unavailable in pvt sector’
Earlier, there was a limited pool of such professionals and identifying the right candidate took time,” said Mukul Shrivastava, partner, Forensic & Integrity Services, EY. Recruitment was limited to three or four employees a year. “But the situation is different now. Requests from former law enforcement officers looking to join forensics have increased to about two or three a month,” said Shrivastava.
Consultancies, including the big four ones, have seen a surge in corporate investigation assignments such as cases involving fraud by employees, espionage by competitors, siphoning of funds by debtors or even due diligence about a potential CEO. Credential investigation and background verification are becoming mandatory in large corporates and multinationals before carrying out any merger or acquisition.
“Formal training for imparting intelligence gathering knowledge or skills isn’t available in the private sector in India. So, the only people who have relevant experience and expertise are those who have done it for a living with law enforcement agencies. These are also individuals who have the relevant contacts and understand the importance of operating with stealth,” said Nikhil Bedi, partner and leader, forensic, Deloitte India.
Many fraud investigations do not involve just accounting anymore. They could unearth economic crimes that would require a probe by other enforcement agencies. “With this change, we need individuals with a good amount of skill in crime investigations, documentation and skill for managing investigations that can come under scrutiny by enforcement agencies,” said Sivarama Krishnan, partner and leader, cyber security, PwC India.
Former law enforcement officers can also bring a different perspective to a forensic project. In one instance, a company engaged in media and telecom suddenly faced rising costs and a drop in revenues, prompting it to appoint a consultancy firm for a forensic probe. “Our first instinct was to check that company’s financials. But an IPS officer who had joined us suggested we look at the customers. He quickly deduced a flaw that had allowed bogus customers to get on board,” said a partner with the firm.
In another instance, during an investigation undertaken by a consultancy, a former law enforcement officer merely examined documents and pointed out that some of them appeared potentially fraudulent.
Firms could also use former law enforcement officers to train employees on how to start with a probe or what to look for, with illustrations from real life. “Often, for several investigators, the opportunities and pay packages that consultancies offer seem to be a big attraction. That, along with the fact that now consultancies are also entering into more complex investigations, the scope for law enforcement officers is only increasing,” said D Sivanandhan, former DGP of Maharashtra.