Academic journal article International Journal of Criminal Justice Sciences

Dependency of Police Prosecution on Private Examinations of Financial Crime Suspicion: The Case of Langemyhr Investigation in Norway

Academic journal article International Journal of Criminal Justice Sciences

Dependency of Police Prosecution on Private Examinations of Financial Crime Suspicion: The Case of Langemyhr Investigation in Norway

Article excerpt

Introduction

Fraud examiners, financial crime specialists and counter fraud specialists are in the business of private internal investigations for their clients. If they detect evidence of serious financial crime, they are expected to report their findings to the police, although there are no specific guidelines for this procedure. The increased role of the private sector in crime control and order maintenance as reported by Kempa et al. (2009) and Schneider (2006), makes public sector law enforcement more dependent on the private sector. Societies have to rely on the rule of law by creating communication and cooperation between public and private policing.

This situation is indeed problematic. In democratic societies, the rule of law and law enforcement is supposed to be the sole responsibility of government authorities. A number of issues, dilemmas, problems and challenges in private investigations are important to explore in order to understand the business of financial crime specialists. Their hidden world is problematic. It was Williams (2005) and Schneider (2006), who first described and discussed problems related to privatizing economic crime enforcement and governance of private policing of financial crime. Since their research one decade ago, few of the problems they identified have been solved. Rather, the forensic accounting and corporate investigation industry has grown rapidly without any signs of regulations. Exceptions include the emergence of the counter fraud specialist in the United Kingdom (Button et al., 2007a, 2007b; Button and Gee, 2013) and the works of voluntary organizations such as ACFE (2014) and CFCS (2014), who are both educating their members on a continuous basis.

In this article, a case study from Norway is presented, where a construction firm was suspected of fraud. The case study illustrates the problematic dependency of police prosecution on private examinations of financial crime.

Private Investigators

Private investigators examine facts, causes and responsibilities for negative incidents. Their inquiries include fact finding, causality study, change proposals and suspect identification. Recent years have seen an increasing use of investigation in terms of the assessment of financial irregularities. The inquiry form - which primarily takes place in public and private companies - aims to uncover failing internal controls and any financial incidents such as corruption, embezzlement, tax evasion and other forms of economic crime (ACFE, 2014; Button et al., 2007a, 2007b; Button and Gee, 2013; CFCS, 2014; Machen & Richards, 2004; Markopolos, 2010; Morgan & Nix, 2003; Schneider, 2006; Tunley et al., 2014; Wells, 2003, 2007; Williams, 2005).

Criminal investigation is a procedure or method for reconstructing the past. It is the work of creating an account of what has happened, how it happened, and who did what to make it happen. Negative events and incidents have happened in the past that need to be studied. Therefore, past events and sequence of events need to be reconstructed (Osterburg & Ward, 2014).

Private investigators do not have the same powers as the police, but they do have liberty to work as per their convenience or discretion. Therefore, it is an interesting research endeavor to evaluate the work of private examiners in financial crime investigations. Three relevant theories are suited for such an evaluation. First, the blame game hypothesis suggests that investigators may be misled in their search for suspects (Eberly et al., 2011; Lee & Robinson, 2000). Second, the rotten apple hypothesis versus the systems failure hypothesis stating about misled investigators in either searching for one guilty person or searching for cultural deviance in the client organization (Ashforth et al., 2008; Punch, 2003). Finally, the stakeholder theory may imply that private investigators tend to ignore all others but the client, since the client is paying their bill (James, 2014; Matwijkiw & Matwijkiw, 2010; Verbeke & Tung, 2013). …

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