How to start a successful cross-border investigation

Many companies are not prepared to handle cross-border investigations of matters such as fraud, corruption, misconduct or data breaches, and training in this delicate, culturally sensitive task is often neglected, according to a new survey report.

More than 40% of 60 executives who manage their organisations’ cross-border investigations said in a KPMG global survey that their companies lack sufficient resources to handle these investigations. Yet just 35% of respondents said their companies conduct investigations training each year.

Meanwhile, 95% of the respondents said they expect their needs for cross-border investigations to increase or stay the same over the next year, according to the survey report.

“Given the velocity with which compliance happens, management can never be prepared enough when it comes to its investigative protocols and procedures,” Phil Ostwalt, who coordinates investigations for KPMG’s Global Forensics practice, said in a news release. “And yet our findings show that many companies are underprepared to meet this challenge.”

A lack of investigative expertise can pose risks at a time when corruption appears to be on the rise. Respondents in 80 of 107 countries represented in Transparency International’s Global Corruption Barometer 2013 survey perceived corruption as increasing.

Cross-border investigations require special care, according to KPMG, because of cultural differences and because data privacy laws vary between jurisdictions. Almost half (46%) of the KPMG survey respondents said handling data privacy issues is their greatest challenge in conducting cross-border investigations.

Following six steps early in the process can help lead to successful cross-border investigations, according to the KPMG report:

1. Assess the lead or allegation. Evaluating the credibility of the allegation and identifying cultural norms that may affect the investigation are important, the report says.
2. Implement short-term action steps. Preliminary actions to protect integrity, evidence and employee safety may include notifying and/or temporarily suspending accused employees, preserving relevant documentation and notifying employee representatives or work councils.
3. Develop a plan. This should establish the scope and objectives for the investigation, the documents and data to be collected, individuals to be interviewed, a timeline and milestones, and the reporting process, according to the report.
4. Determine who in management should be notified. The circle of trust should be small, and those notified should be reminded about the confidentiality and integrity of the process, the report says.
5. Establish who is in charge. A company should have a detailed procedure or protocol describing which department or individuals will conduct and oversee an investigation, according to the report.
6. Assess special legal or cultural considerations. Counsel familiar with the law of the jurisdiction should be consulted, according to the report.

Déan Friedman, leader of KPMG’s Investigations Network in Europe, the Middle East and Africa, said in a news release that it is important for companies to follow the proper steps before taking any action with regard to an allegation of misconduct.

“Taking time to assess the matter is critically important for the sake of confidentiality and privacy, as well as the credibility of the compliance programme, the integrity of the investigation process and the reputation of those involved,” Friedman said. “Balancing the integrity of the investigative process with the legal rights that overseas subjects enjoy under local law is both an art and a science.”

—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.