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Breaking Down Financial Forensics
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Breaking Down Financial Forensics
Financial forensics is similar to forensic accounting, which utilizes accounting, auditing, and investigative skills to analyze a company's financial statements for possible fraud in conjunction with anticipated or ongoing legal action. Two forensics experts made their names exposing two of the largest frauds in recent history. Jim Chanos, noted short-seller at the helm of hedge fund Kynikos Associates, dug into the financial statements and other filings of Enron Corporation and uncovered irregularities regarding mark-to-market practices of its energy derivatives and violations of GAAP rules on matching policy in the company's merchant banking operations. Enron eventually imploded, delivering a tidy sum to Chanos' fund.
Harry Markopolos, an obscure securities professional in the early 2000s, attempted for several years to warn the Securities and Exchange Commission (SEC) and others about the Ponzi scheme perpetrated by Bernie Madoff. Markopolos finally gained recognition as the lone whistleblower when Madoff's scheme collapsed. He details his saga in his 2010 book; No One Would Listen: A True Financial Thriller. Markopolos continues his fraud-seeking craft to the benefit of investors at large. Madoff will sit in a jail cell until he dies.
Other Uses for Financial Forensics
Other applications for financial forensics exist. Forensic accountants may also work with government agencies, including tax authorities, to recover illegally obtained funds or help prosecute money laundering. Forensic accountants can also help companies design accounting and auditing systems to manage and reduce risk.
https: //www. fbi. gov/investigate/white-collar-crime
White-Collar Crime
Reportedly coined in 1939, the term white-collar crime is now synonymous with the full range of frauds committed by business and government professionals. These crimes are characterized by deceit, concealment, or violation of trust and are not dependent on the application or threat of physical force or violence. The motivation behind these crimes is financial—to obtain or avoid losing money, property, or services or to secure a personal or business advantage.
These are not victimless crimes. A single scam can destroy a company, devastate families by wiping out their life savings, or cost investors billions of dollars (or even all three). Today’s fraud schemes are more sophisticated than ever, and the FBI is dedicated to using its skills to track down the culprits and stop scams before they start.
The FBI’s white-collar crime work integrates the analysis of intelligence with its investigations of criminal activities such as public corruption, money laundering, corporate fraud, securities and commodities fraud, mortgage fraud, financial institution fraud, bank fraud and embezzlement, fraud against the government, election law violations, mass marketing fraud, and health care fraud. The FBI generally focuses on complex investigations—often with a nexus to organized crime activities—that are international, national, or regional in scope and where the FBI can bring to bear unique expertise or capabilities that increase the likelihood of successful investigations.
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FBI special agents work closely with partner law enforcement and regulatory agencies such as the Securities and Exchange Commission, the Internal Revenue Service, the U. S. Postal Inspection Service, the Commodity Futures Trading Commission, and the Treasury Department’s Financial Crimes Enforcement Network, among others, targeting sophisticated, multi-layered fraud cases that harm the economy.
Major Threats & Programs
Corporate Fraud
Corporate fraud continues to be one of the FBI’s highest criminal priorities—in addition to causing significant financial losses to investors, corporate fraud has the potential to cause immeasurable damage to the U. S. economy and investor confidence. As the lead agency investigating corporate fraud, the Bureau focuses its efforts on cases that involve accounting schemes, self-dealing by corporate executives, and obstruction of justice.
The majority of corporate fraud cases pursued by the FBI involve accounting schemes designed to deceive investors, auditors, and analysts about the true financial condition of a corporation or business entity. Through the manipulation of financial data, the share price, or other valuation measurements of a corporation, financial performance may remain artificially inflated based on fictitious performance indicators provided to the investing public.
The FBI’s corporate fraud investigations primarily focus on the following activities:
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