Who to Call: Authorities or a Financial Forensic?

Financial forensics perform financial investigations, provide analysis, support litigation and / or prosecution, and report their findings to the counsel, company officers and /or the board. Financial Forensics is often referred to as “the art and science of investigating people and money.” Contrarily, legal and regulatory authorities perform investigations focused on enforcing laws and regulations and they are generally internally accountable for enforcement. The table below illustrates key distinctions between financial forensic and legal / regulatory authorities.

Legal and regulatory authorities can and will investigate wrongful acts; but their objective is to enforce the law, and for a number of reasons, this may not align with the organization’s main concerns. For this reason, notifying or seeking assistance / relief from authorities prior to knowing all the facts and circumstances may result in an unwelcome outcome.

Publicity / Brand Protection

Primarily an organization may hesitate to call the authorities for fear of bad publicity. If an allegation is not handled correctly, the organization can be negatively associated with the occurrence in question, damaging its reputation and degrading its brand. Moreover, the company can be forced into a defensive mode from attacks by the accused.

When unsupported accusations reach the press they become amplified. Even if accusations are later absolved, the negative connotation will forever surround the organizations reputation. Engaging an experienced financial forensic professional that has the skill and resources to perform a discreet  investigation  and  report  the  results to the appropriate personnel, provides assurance that factual information is provided to the appropriate people.

Obtaining impeccably documented evidence of the actions of the perpetrator before suspicions are disclosed is a means of taking control, directing the focus of remedial actions, and securing the best possible outcome for the organization.

Tipping-Off the Adversary

Premature disclosure provides a potential fraudster advanced warning of investigation allowing them time to destroy evidence or create false leads. A financial forensic professional can access records remotely and surreptitiously, and has the expertise to focus on the financial unknown as well as analyze discovery. Authorities

also have investigative experience; however, only specialized units have the requisite  financial  expertise.  Engaging a team of accredited financial forensic professionals and criminal investigation experts provides for the financial expertise and the criminal investigative credentials to ensure the best chance of restitution and/or   prosecution.   Partnering   with a financial forensic professional communicates to would-be fraudsters that the organization will pursue its best interests to the fullest extent, which is an effective deterrent to potential future losses.

Discovery of the Financial Unknown

The company may not be aware if there is wrongful act in play within their own organization. They may be a victim of loss from theft of trade secrets, costing models, or intellectual property. Incidents that may be legitimized include stagnant or declining sales, loss of bided projects, unexplained increase in cost of manufacturing, or a myriad of other problems. Through investigation it is frequently found that the original concerns are indicators of underlying issues. In many cases misconduct can be tied to an individual. This is when having a financial forensic expert can prove most useful, as they do not have a personal bias when reviewing the evidence. Unsavory activity has often been going on far longer than would have been suspected.

A financial forensic expert, focused on providing tangible value, will provide a risk assessment and mitigation plan. Engaging a team with the resources to perform eDiscovery, cyber-security, benchmarking, and investigative analysis is paramount to uncovering all financial unknowns.

Calling in the Authorities

An experienced financial forensic professional plans every engagement with attorney support in mind. Litigation and criminal prosecution requires accredited, recognized investigative and legal testimony expertise with the acumen to present technical and complex transactions to authorities in concise terms.

The time to call in the authorities is after an accredited financial forensic team has provided a thorough investigation and analysis. This has many benefits including:

  • No surprises – the company has been given full disclosure
  • Specialized Professional Support - impeccably documented processes and findings
  • Access to direct line of inquiry
  • Ability to lay out a presentation of facts
  • Reduce cost of litigation

Could it be Time to Bring in a Forensic Accountant?

White-collar crime is significantly on the rise and is becoming increasingly difficult to identify and effectively respond to. The most recent FBI’s Financial Crimes Report cites a steady rise in securities and commodities frauds as investors seek alternative investment opportunities.  This  spawns the development of new conspiracies such as, securities market manipulation via cyber intrusion, the increase in commodities fraud, the continued rise of Ponzi schemes, and foreign-based reverse merger market manipulation schemes. The report also states that one of its highest priorities is corporate fraud investigation. This includes:

  • Falsification of financial information of public and private corporations
    • False accounting entries and /or misrepresentations of financial condition
    • Fraudulent trades designed to inflate profit or hide losses
    •  Illicit transactions designed to evade regulatory oversight
  • Self-dealing by corporate insiders