Fraud in a club
Clubs should be prepared to act immediately on suspicions of fraud. Whether investigations are conducted in-house or by a third party, it is important that the club has a basic understanding of the investigation process and what you can and cannot do.
Many officers and committees have encountered a fraud in their club or have heard stories about fraud in other clubs. Clubs being cash businesses are prone to thefts and the question is what the committee should do when the steward fails to bank £3,000 or the Treasurer fails to bank three months of sundry income.
A range of investigation options are available to clubs:-
- do nothing
- in-house investigation
- external investigation by professional advisers/consultants
- police investigation (potentially leading to criminal prosecution).
In the past the first reaction of a committee was to phone the police to start a criminal investigation, however, more often than not the police fail to take action:
- The detective responsible for the investigation is called off to a more important crime, or
- The detective states there is insufficient evidence or there are just too many people ‘with their finger in the pie’ to bring a successful criminal action.
So a committee has to think carefully which course of action they take. The committee’s responsibility is to ‘protect the clubs assets’, the best course of action is usually to take steps to recover the stolen money and to ensure no further losses occur.
The Fraud Advisory Panel have issued guidance on this subject and they point out that if the police are called you can no longer expect them to do all the work, they do not have the experience or the resources and it will be necessary for the club to provide them with the documented evidence.
The committee should also consider that criminal action may not be the best course. Law enforcement agencies focus on gaining a criminal conviction not gaining financial redress for the club. Civil action is becoming more common, it is easier to satisfy the civil burden of proof than the criminal burden of proof, making civil recovery preferable in some cases. Taking civil action does not prevent a separate criminal charge being brought. We have included in the newsletter some notes recently issued by the ‘Fraud Advisory Panel’ which gives guidance on:
1. Introduction to civil recovery
2. Civil Recovery of Assets
A key element of their guidance is the importance of obtaining good quality evidence.
- If there is financial loss the club’s auditors should be asked to provide a written report quantifying the loss. The evidence provided by the auditor will stand up much better in court being prepared by an independent person to a professional standard.
- Evidence from witnesses should be documented. If the resources are available to the club the statements should ideally be prepared by a solicitor or other person with a background in taking statements. The club may have a member who is a former police officer with experience in taking witness statements for presentation to the courts.
Once the evidence is gathered the perpetrator should be interviewed and presented with the evidence in the hope they have the funds and are willing to repay the club immediately. Failing repayment of the monies owed civil action, perhaps in the small claims court, should be started.
- Allow too many people to know about the allegations before they are investigated.
- Make defamatory statements to members at the AGM. To protect the club from a counter claim it may not be possible to tell the members all the facts.
- Allow individual officers and staff to confront the suspected fraudsters as this could not only lead to physical danger but also to the destruction of evidence.
- Consider the immediate actions that need to be taken to preserve evidence and prevent further losses occurring.
- Use experienced experts to gather high quality evidence and witness statements.
- Evaluate all the costs of civil action both from the club’s professional advisors and the court.
- Consider the ability of the perpetrator to repay the missing funds.
- Follow legislation, specifically employment law if the perpetrator is an employee.
- Manage the flow of information about the investigation on a ‘need to know basis’, but be ready to react to internal rumour and/or external enquiry.
- Consider the use of ‘parallel sanctions’ and associated criminal or disciplinary proceedings for employees.
If the correct procedures are followed by the club the chance of success is greatly improved.