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Spike in Internal Fraud Expected

Historic data indicate a big increase while company-wide layoffs often reveal the culprits.

By Staff Writer | Updated on February 17, 2009

If history is any guide, corporations can expect a serious increase in internal fraud, legal disputes and regulatory action in the weeks ahead as a result of the current U.S. economic crisis. Now more than ever, CFOs and compliance officers must take careful measures to strictly follow financial risk management standards and ensure new employees have spanking clean records, says Peter Turecek, senior managing director at New York City-based Kroll Inc.

A new report from the global fraud and litigation consultant cites sharp increases in arbitration claims by investors seeking to recoup losses after Black Monday, Oct. 19, 1987, and following the market downturns of 1991 and 1992. The Financial Industry Regulatory Authority (FINRA) reports that new arbitration cases rose 54% from 2007 to 2008 alone, according to Kroll.

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