Those of you who keep up with this blog have heard the statistics before. The Association of Certified Fraud Examiners ("ACFE") estimates that the average business enterprise, including non-profit organizations, loses 5% of its annual revenue to employee fraud. ACFE further estimates that only 25% of all fraud cases result in civil actions. My experience supports both of these premises. Fraud is very widespread and the victims are reluctant to take action beyond terminating the perpetrator.
Against this backdrop, one of the most recommended safeguards against fraud is fidelity insurance coverage for dishonest acts by employees. If your clients do not carry fidelity coverage, they need it and it borders on malpractice if you do not inform them of this need. That said, fidelity policies have very strict requirements for filing and collecting on claims (as an aside, remember that claims adjustors are hired to not pay claims).
The deadline for providing notice of a loss and submitting claims is immovable. Make sure notice is provided immediately, before you conduct the investigation. A lot of information is required with the claim. Any missing pieces will delay or preclude payment of a claim.
A certified fraud examiner ("CFE") can help organize and prepare the claim to ensure maximum recovery. The kicker is that most fidelity insurance policies will pay for the services of a fraud expert. Hence, it is a no-brainer to hire one to direct the investigation. You will need to assign some employees to assist with the investigation; but the CFE will perform most of the work in preparing the claim and supporting documentation. The CFE can also review and rebut any reports from the insurer's experts.
In summary, fidelity insurance is necessary. Get a CFE involved early in the process so that the insurance covers the entire loss.
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