Innovation and collaboration: the forensic analysis of financial crime


Financier Worldwide Magazine

April 2016 Issue

April 2016 Issue

Feared and reviled in equal measure, the scourge of financial crime is an ever-present threat for companies operating in today’s global and highly complex business environment.

Moreover, although no single universal description as to what we mean by financial crime truly exists, the term is generally associated with instances of fraud, electronic misconduct, money laundering, bribery and corruption, market abuse and insider dealing, information security and cyber crime.

That cyber crime is a game-changer is undeniable, forcing companies to implement ever more stringent detection and prevention strategies into their security protocols. A 2015 report by the World Economic Forum (WEF) revealed that 90 percent of global companies believe they are ‘insufficiently prepared’ to protect themselves against a cyber attack.

According to the Association of Certified Fraud Examiner’s (ACFE) ‘2014 Global Fraud Study, Report to the Nations on Occupational Fraud and Abuse’, the losses, financial and otherwise, suffered by companies as a result of financial crime are considerable. A typical organisation loses 5 percent of its revenues to fraud each year. The median loss caused by a single case of occupational fraud is $145,000, and 22 percent of occupational fraud cases results in losses of more than $1m.

Therefore, given the substantial sums involved and the impact on the bottom line, not to mention the profit disgorgement, penalties, reputation damage and even ejection from specific markets that can result from a regulatory breach, the investigation of a financial crime, especially in situations where the behaviour of senior management is being called into question, requires a thorough, professional, independent approach.

Fighting financial crime

As the fight against financial crime becomes ever more complex, the challenge for organisations is to identify the most innovative solutions for dealing with the issue. Much trumpeted new facilities such as the Institute for Financial Crime (IFFC) in The Hague, launched in May 2015, are expected to play a part.

“The Institute for Financial Crime’s commitment to educating fraud professionals is to be admired and can only help to boost integrity in markets,” says Kevin Shergold, a partner at Grant Thornton UK LLP. “Innovation in mining typed data, primarily user-generated documents and emails, through ‘key word’ searches has recently evolved to facilitate the review of communications in chat rooms and instant messages. Moreover, key word searches can be performed against the spoken word too, where conversations have been recorded. It isn’t just eyeballing what has been said or written either – intelligent software designed by criminologists can now be deployed proactively to identify aberrant behaviour in employees’ communications.”

Early responses

Of course, it goes without saying that a company’s initial response to a financial crime is crucial. At this stage, being proactive in marshalling the various parties involved could turn out to have a major bearing on whether the eventual financial losses are to be categorised as ‘big’ rather than ‘astronomical’.

A company’s initial response to a financial crime is crucial.

And while it should be recognised that when a financial crime is committed there is a lot to be considered within a short space of time, early engagement with specialist practitioners is critical, according to Mr Shergold, not least to avert the risk of tainting evidence and tipping off the perpetrators.

Legal advice can also help companies to assess privilege, reporting requirements, the extent of independence and scope of the response team, and to ensure the investigation is fit for the remedy. “Ultimately, the response needs to build a factual narrative of the crime,” says Mr Shergold. “Forensic accountants, trained investigators and forensic technology specialists know where information resides and how to get at it – and importantly, how to make sense of it.”

As the launch of the IFFC last year demonstrated, innovative solutions for tackling financial crime are desirable and much sought after. However, solutions that are somewhat less innovative but no less effective include whistleblowing. “Statistics routinely show the value of whistleblowers when it comes to identifying financial crime,” confirms Mr Shergold. “Despite this, many whistleblowers have been ignored or poorly treated. This began to change following the introduction of the Dodd-Frank Act in the US which supports and rewards some whistleblowers. And since late 2015, the UK’s Financial Conduct Authority (FCA) has required firms to have a dedicated whistleblowing champion as governments and regulators continue to recognise the importance of people who are willing to ‘speak up’,” he adds.


At present, financial crime across the globe remains rife. Although there may be no overriding solution, there are certainly innovative options available to help companies detect it when it occurs, understand its impact and mitigate their vulnerability to it.

No one expects financial crime to be eradicated, but at the very least businesses, government agencies, and anti-fraud practitioners can pool their resources to assist in its swift detection and deterrence – an approach that is surely in everyone’s interests.

© Financier Worldwide


Fraser Tennant

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