Prosecution: The Ultimate Step in Fraud Deterrence

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley.

So you’ve been the victim of fraud.

You knew something was amiss.  You hired a Certified Fraud Examiner.  A thorough fraud investigation uncovered the fraud and identified the perpetrator.  You fired the fraudster — or punished them internally — and implemented stronger anti-fraud controls and forensic accounting measures as part of your overall fraud deterrence program.

So it’s over, right?

Not quite.

“You really need to refer the matter to law enforcement,” said Anderson. “Simply ridding your organization of the offending employee isn’t the answer.  You are effectively letting him or her off the hook, and allowing that employee to move on to potentially victimize another unsuspecting organization.”

While the majority of organizations victimized by fraud do refer the matter to law enforcement, the number may be lower than you might think.

In its 2016 Report to the Nations, the Association of Certified Fraud Examiners (ACFE) – the world’s largest anti-fraud organization, dedicated to fighting fraud through its more than 75,000 members in more than 150 countries worldwide – found that only 58 percent of fraud cases were referred to law enforcement.  The remaining 42 percent were not.  This finding represents a downward trend from each of the previous two Reports.

Of the cases referred for prosecution, more than 76 percent resulted in a guilty plea or a conviction.  Only about two percent resulted in an acquittal.  In most of the other cases, law enforcement declined to prosecute.

With such a high percentage of convictions and guilty pleas, why did so many companies decline to seek prosecution?  The ACFE survey – a biennial global survey on the costs, schemes, perpetrators and victims of fraud – identified the top four reasons:

  • Nearly 39 percent said fear of bad publicity kept them from referring the case to law enforcement;
  • More than 35 percent thought internal punishment was sufficient;
  • More than 23 percent reached a private settlement with the fraudster, and
  • Almost 19 percent thought that referring the case to law enforcement and helping with prosecution would be too costly.

Anderson, a Certified Fraud Examiner and an ACFE member, strongly encourages companies, non-profits and government offices to refer fraud cases to law enforcement.  He said he is particularly reluctant to advocate for internal punishment without criminal consequence.

“Internal punishment alone means the fraudster not only evades criminal prosecution, but also gets to keep his or her job,” Anderson said.  “Now, you have an employee who not only is skilled at committing fraud, but also has learned from the mistakes he or she made that led to the discovery of the fraud.  The result is that the person often ends up further defrauding the organization.”

He recalled a case in which a company controller who committed fraud was allowed to remain in his job by agreeing to repay the stolen money through regular payroll deductions.

After some time passed, Anderson was retained by the company to conduct another fraud investigation, which found that the controller was again defrauding the company in a variety of ways, including having instructed the payroll department to stop the payroll deductions designed to repay the previous fraud.  The company terminated the fraudster, but again declined to prosecute.

“I have no doubt that today the employee is working at another company and perpetrating a fraud there,” he said.

There also is a key benefit to your fraud deterrence efforts that comes from referring fraud cases to law enforcement, Anderson said.

“Seeking prosecution of a fraudster is one of the strongest fraud deterrence messages you can send,” he said.  “It tells every other employee that fraud will not be tolerated and, in fact, will be prosecuted to the fullest extent of the law.”

Anderson recommends that every organization enact a comprehensive fraud deterrence program created by an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia the and Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.