Conduct unbecoming: investigating the ‘enemy within’

October 2025  |  COVER STORY | RISK MANAGEMENT

Financier Worldwide Magazine

October 2025 Issue

Winston Churchill once proclaimed in a 1922 speech that the ‘enemy within’ is more dangerous than the enemy outside – suggesting that a perceived internal threat holds greater sway than one of external origin. Internal threats may be intentional or unintentional, malicious or collusive. Regardless of their nature, in a corporate context they must be addressed effectively and discreetly, ideally through an internal investigation.

An internal investigation is a formal inquiry conducted within an organisation to examine allegations of misconduct or policy violations. Its aim is to gather evidence, establish facts, determine whether wrongdoing occurred, and identify root causes to prevent future issues. Such investigations are vital for establishing an ethical culture, promoting corporate governance, protecting reputation, and ensuring a fair and safe workplace.

Internal investigations often unfold in environments charged with tension and uncertainty. The process demands not only procedural rigour but also emotional intelligence. Investigators must navigate complex interpersonal dynamics, balancing empathy with objectivity. This dual lens helps ensure that the inquiry remains fair, thorough and sensitive to the human impact involved.

“Internal investigations are commissioned for a wide variety of reasons,” says Mary Young, a partner at Kingsley Napley. “These include where an employee raises a concern or whistleblowing claim, a complaint has been made by a client or customer, or there has been an approach from the press on behalf of a disgruntled third party.”

“There has also been a notable increase in investigations arising from allegations of sexual misconduct in the workplace, with non-financial misconduct being a more common feature of the investigations landscape,” adds Caroline Day, a partner at Kingsley Napley.

While employee concerns remain the primary trigger for internal investigations, a growing number of cases are being flagged by formal whistleblowers to external bodies, such as auditors.

“There is a growing trend of external auditors insisting on internal investigations, as they increasingly focus on fraud-related issues,” observes Jonathan Middup, a partner at EY. “Auditors seek assurance that these concerns are thoroughly addressed and that implications for management integrity, including the possibility of other misconduct, are investigated.”

Investigatory model

When an internal investigation is triggered, the organisation’s response must be swift and appropriate. The success or failure of the investigation often hinges on this initial reaction.

An effective investigatory roadmap is essential. It should encompass containment, investigation and preparation for potential litigation – while ensuring business continuity.

“A fraud is akin to a business heart attack; thus, a rapid response in the early stages is vital for a more favourable outcome,” suggests Mr Middup. “Organisations must balance the urgent need to halt further misconduct with the requirement for careful consultation to avoid missteps.”

Sona Ganatra, a partner at Fox Williams, outlines the essential elements of a robust investigatory framework.

A well-defined scope is the foundation of any effective investigation. This involves clarifying the nature and severity of the concerns – are they current or historical? Do they suggest regulatory breaches, criminal conduct or internal misconduct? Determining whether an investigation is appropriate, or if the matter should be escalated to law enforcement, is a critical early decision. Equally important is identifying the desired outcome.

Choosing between an internal or external investigation hinges on the gravity of the issue and the individuals involved. In cases where impartiality is paramount, appointing external investigators can help mitigate perceptions of bias or conflicts of interest.

When employees are subject to investigation, suspension should be handled in line with company policy. Their access to physical premises, IT systems and financial resources must be restricted. At the same time, whistleblowers must be protected and supported throughout the process.

Communication during an investigation requires careful strategy. Stakeholders should be reassured without disclosing details or commenting on the investigation itself. Premature or speculative statements can lead to misinformation or unintended legal exposure. Ideally, public communication regarding the investigative findings, if any, should be postponed until the investigation is complete, as companies may have regulatory reporting requirements to publicly state an investigation has begun and is ongoing.

Organisations must also identify and fulfil any reporting obligations, including disclosures to markets, regulators or insurers.

The ripple effects of an investigation can extend far beyond its immediate scope. Departments not directly involved may experience disruption, morale shifts or increased scrutiny. Proactive communication and leadership visibility during this time can help stabilise the organisation, reinforcing a culture of accountability while maintaining operational momentum and employee confidence.

Evidence gathering is a critical phase, involving the collection of relevant documents and interviews with key individuals. Depending on the complexity, IT teams or external forensic experts may be needed. As evidence is reviewed, investigators should remain alert to any emerging issues that warrant further scrutiny.

Finally, reporting the findings must be managed with precision. Companies should avoid creating unnecessary documentation that could be subject to disclosure. Engaging external legal counsel early in the process can help preserve legal privilege and ensure sensitive information is handled appropriately.

“Investigations must always be guided primarily by the nature of the alleged misconduct and the potential stakeholders in mind,” adds Ms Ganatra. “That said, all firms should have a clearly defined investigations policy in place to help frame the steps that should be taken when an allegation is raised or a concern identified. Not having an appropriate plan in place could have disastrous consequences, including the destruction of crucial evidence, loss of assets and reputational harm.”

Organisations may also be required to publicly explain their investigatory approach. “This is the biggest test of any investigation process,” believes Narasimhan S L, chief human resources officer at Acuity Knowledge Partners. “It is important to take a measured and thoughtful approach to data gathering and recognise that the people raising issues anonymously do so because of an underlying cultural issue: fear of retaliation.

“Therefore, the actions organisations take and what they say matters as they can give their staff a level of assurance that the investigation will ultimately lead to a positive outcome,” he continues. “Ensuring consistency in established standards, acting in a timely manner and closing claims swiftly also builds more functional credibility.”

Pitfalls and considerations

Internal investigations are often sensitive, with numerous pitfalls to navigate. The stakes are high, and missteps can have lasting consequences for individuals and the organisation as a whole.

Bias is a common risk. “It is critical to ensure that the investigation is unbiased and that decisions are made based on facts alone and aligned with internal standards,” attests Mr S L. “To that degree, anonymising individuals and looking at the issue holistically goes a long way in managing the investigation process objectively.”

“Investigators must also be aware of unconscious bias, which can subtly influence decision making even when overt prejudice is absent,” says Paul Peterson, a partner at BDO Forensics. “Training in impartiality and cultural competence can help mitigate these risks. It is essential that those conducting investigations are selected not only for their technical expertise but also for their ability to remain neutral and objective under pressure.

Mr Middup identifies further pitfalls: confronting individuals prematurely, which may hinder evidence gathering; excessive consultation with senior stakeholders, which can delay progress; failure to meet both organisational and auditor expectations; and insufficient focus on control improvements and lessons learned.

Another common error is failing to document the rationale behind key decisions. Without a clear audit trail, organisations may struggle to defend their actions if challenged by regulators or in court. Investigators should maintain detailed records of interviews, evidence reviews and procedural steps taken, ensuring transparency and accountability throughout the process.

Confidentiality must be maintained, too. “Both in the investigation itself and in the treatment of data collected, it is extremely important to ensure any data collected which contains personal information is protected to mitigate risk of a complaint being made by a data subject in the future,” says Ms Day. “Where reporting obligations arise, such as to a regulator, it is important these are carefully considered and a record of decisions kept.”

In addition to legal compliance, confidentiality is vital for preserving trust. Leaks or unauthorised disclosures can damage reputations and discourage future whistleblowers from coming forward. Organisations should implement strict access controls and limit information sharing to those directly involved in the investigation.

Interviewing witnesses requires careful planning. “Where allegations of criminal offending have been made and there is a risk of criminal liability to the organisation and its employees, thought should be given to the appropriateness of conducting interviews and affording those at risk of criminal or regulatory liability the benefit of legal advice,” says Ms Young.

She also warns that investigations must not interfere with ongoing or potential criminal proceedings, particularly in cases involving fraud or money laundering.

Timing and coordination with external authorities are crucial. If law enforcement is involved, investigators must liaise appropriately to avoid compromising evidence or obstructing justice. In some cases, it may be necessary to pause internal inquiries until official investigations are complete, or to share findings under legal guidance.

Holly Carr, a managing director at BDO Forensics, cautions against rushing investigations to satisfy internal stakeholders. “Directors should consider the potential reasons why internal stakeholders are rushing an investigation, as this is a common technique to block or restrict the investigators,” she adds.

Pressure to conclude quickly may stem from reputational concerns, financial implications or internal politics. Investigators must resist such pressures and advocate for a thorough, methodical approach. A rushed investigation not only risks overlooking critical evidence but may also undermine the credibility of the findings, leaving the organisation vulnerable to future scrutiny.

International complexities

Allegations involving international offices or personnel introduce additional challenges.

“When allegations involve offices or people in another country, organisations need to be mindful of additional complexities, such as different legal and regulatory frameworks, data privacy laws and cultural sensitivities in each country involved,” explains Mr Peterson. “Language barriers, cross-border data collection and varying in-country government reporting requirements can also make things more challenging.

“Working closely with local in-country counsel, staying on top of international data transfer rules, and tailoring your approach to align with local customs and laws can make a significant difference,” he continues. “Taking these steps helps ensure the investigation goes as smoothly as possible.”

Beyond legal and procedural considerations, organisations must also account for operational and logistical challenges. Time zone differences can complicate coordination and delay decision making, particularly when urgent action is required. Varying levels of technological infrastructure across jurisdictions may affect the ability to collect and preserve digital evidence consistently.

Furthermore, cultural norms around hierarchy, authority and conflict resolution can influence how allegations are reported and perceived. Investigators must approach these dynamics with sensitivity and adaptability, ensuring that local employees feel safe and respected throughout the process.

It is also important to consider the reputational implications of cross-border investigations, especially in regions where public scrutiny or government oversight is more intense. Establishing clear protocols for international collaboration, including secure communication channels and multilingual documentation, can help streamline efforts and reduce misunderstandings. Ultimately, a globally aware and locally responsive approach is essential for conducting effective investigations across borders.

Experts and witnesses

Managing multiple parties – including external experts and witnesses – requires clear communication and defined responsibilities.

“Where external experts are involved, thought should be given to who is best placed to support the investigation and what their role will be,” asserts Ms Day. “Experts should be clearly informed of the purpose of their instruction, and care should be taken to preserve the privilege afforded to the investigation where possible, including in dealings with experts.”

Witnesses must be informed about confidentiality, potential disclosures, legal risks and interview logistics. Legal representation may be necessary, and consideration should be given for recording interviews.

In addition to legal and procedural considerations, investigators should be mindful of the psychological and emotional impact on witnesses. Interviews can be stressful, particularly when the subject matter involves sensitive allegations. Providing access to support services, such as counselling or employee assistance programmes, can help mitigate distress and encourage cooperation.

“Investigators should also ensure that witnesses are not subject to retaliation or undue pressure from colleagues or management,” adds Ms Carr. “Where appropriate, interviews should be conducted in neutral locations to preserve impartiality and comfort.”

 Furthermore, maintaining a consistent approach to witness engagement – such as using standardised interview protocols and documentation practices – can enhance the credibility and defensibility of the investigation.

It is also advisable to keep witnesses informed of the investigation’s progress where possible, without compromising confidentiality or procedural integrity. This transparency can foster trust and reinforce the organisation’s commitment to fairness and accountability.

Leading with insights

Technological advances are reshaping investigations, making them more efficient and less costly. “Artificial intelligence (AI) is transforming the way we conduct e-reviews, moving beyond traditional keyword searches to more nuanced, context-driven prompts,” notes Mr Middup. “The ability to quickly analyse vast datasets for evidence of fraud will continue to improve, emphasising the importance of access to diverse information sources, including phone messages and sophisticated social media analytics.”

Mr S L believes these advances will reduce stress and improve morale. “A proactive approach is required to curtail such matters and address any emerging issues,” he contends. “Therefore, organisations are leveraging the vast amounts of available data they have on these matters to lead with insights.

“They are also implementing impactful initiatives aimed to be educative, enriching and, ultimately, preventative,” he continues. “As awareness about issues related to bias, harassment or bullying continues to grow, standards are also expected to continue to evolve in the short to medium term, leading to a continued decline in such problems as the culture evolves.”

As technology continues to reshape investigative practices, ethical oversight must evolve in tandem. The deployment of AI tools demands more than technical proficiency – it requires a commitment to transparency and fairness. When used responsibly, these innovations can uncover hidden patterns, streamline complex reviews and reinforce an organisation’s reputation for principled governance.

Intensifying scrutiny from regulators, investors and the media has raised the stakes for internal investigations. Success now hinges on more than procedural correctness. Teams must embody independence and fairness, but also demonstrate resilience and clarity under pressure. In this climate, robust methodology and ethical leadership are no longer optional – they are essential.

© Financier Worldwide

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Fraser Tennant