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Forensic Accountants & Money Laundering

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Treasury Consulting LLP

The document discusses the role of a forensic accountant as an expert witness in money laundering cases. It provides background on money laundering, defines forensic accounting, and outlines the three stages of money laundering. It describes who forensic accountants are and what they do, including investigating financial information, analyzing records, and presenting expert testimony in court. The document also discusses challenges forensic accountants face working on money laundering cases in Nigeria, such as weak infrastructure, corruption, and lack of transparency.

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BY:- RAHUL MAGAN CHIEF EXECUTIVE OFFICER, TREASURY CONSULTING LLP COUNTRY DIRECTOR, INTERNATIONAL INSTITUTE OF CERTIFIED FORENSICS INVESTIGATIONS PROFESSIONALS, INC. COUNTRY DIRECTOR, ASSOCIATION OF CERTIFIED ACCOUNTING PROFESSIONALS 91-9899242978 , SKYPE ~ RAHUL5327 , TWITTER @ RAHULMAGAN8 EMAIL:- INFO@TREASURYCONSULTING.IN , RAHUL.MAGAN@TREASURYCONSULTING.IN 1 MONEY LAUNDERING: THE ROLE OF A FORENSIC ACCOUNTANT AS AN EXPERT WITNESS
HISTORICAL PERSPECTIVE 2 Financial Action Task Force (FATF) 1. Formed by a group of seven industrialized nations in 1989 in Paris. 2. In 1990 established and issued its 40 recommendations. 3. Revised in 1996 and 2003. 4. Additional nine recommendations dealing mostly on measures to counter terrorism.
HISTORICAL PERSPECTIVE (Contd) 3 Recommendation 26 and the evolution of the Economic and Financial Crimes Commission (EFCC). Nigeria. Called Financial Crimes Enforcement Network (FinCEN in USA), Financial Transactions Reports Analysis Centre of Canada (FINTRAC), Australian Transaction Reports and Analysis Centre. Many other countries have different names for it.
HISTORICAL PERSPECTIVE (Contd) 4 Independent Corrupt Practices And Other Related Offences Commission (ICPC) Establishment Act of 2000 The Money Laundering (Prohibition) Act of 2004. The Economic and Financial Crimes Commission Act of 2004
What is Money Laundering 5 Process of concealing Illegal source Application of income derived from criminal or illegitimate activity Subsequent disguising of the source of that income to make it appear legitimate Source: Association of Certified Anti-Money Laundering Specialists - ACAMS.
What is Money Laundering (Contd) 6 Laundered money is like water, it seeks the path of least resistance (ACAMS). Initially, money laundering was associated with drug trafficking and organized crime, however, it has been expanded to include extortion, terrorism, official bribery and corruption, arms smuggling, white collar crime and many other crimes.
The Three Stages: Placement, Layering and Integration. 7 Placement Placement involves physically placing illegally obtained money into the financial system or the retail economy. "Dirty" money is most vulnerable to detection and seizure during placement. (U.S. Financial Crimes Enforcement Network)
The Three Stages: Placement, Layering and Integration (Contd). 8 Layering Layering is the separation of illegally obtained money from its source through a series of financial transactions that makes it difficult to trace the origin. During the layering phase of money laundering, criminals often take advantage of legitimate financial mechanisms in attempts to hide the source of their funds.
The Three Stages: Placement, Layering and Integration (Contd). 9 Layering (Contd) A few of the many mechanisms that may be misused during layering are currency exchanges, wire transmitting services, prepaid cards that offer global access to cash via automated teller machines and goods at point of sale, casino services and domestic shell corporations lacking real assets and business activity that are set up to hold and move illicit funds. (U.S. Financial Crimes Enforcement Network)
The Three Stages: Placement, Layering and Integration (Contd). 10 Integration Integration means converting the illicit funds into a seemingly legitimate form. Integration may include the purchase of businesses, automobiles, real estate and other assets. (U.S. Financial Crimes Enforcement Network)
What is Forensic Accounting? 11 Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial.
What is Forensic Accounting? (Contd) 12 All of the larger accounting firms, as well as many medium- sized and boutique firms, have specialist forensic accounting departments. Within these groups, there may be further sub-specializations: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims, fraud, construction, or royalty audits. (Source Wikipedia). Recently Forensic accountants have started to develop expertise in tracking laundered money. Nigerian Forensic accountants should lead the rest of the world in developing expertise in tracking laundered money. This has urgency written all over it since Nigerias economic growth has been hampered by corruption which is a form of money laundering.
Who is a Forensic Accountant? 13
Who are Forensic Accountants? 14 Forensic accountants may be involved in recovering proceeds of crime and in relation to confiscation proceedings concerning actual or assumed proceeds of crime or money laundering. Some forensic accountants are also Certified Fraud Examiners, Certified Public Accountants, Certified Money Laundering Specialists, or Chartered Accountants. Forensic accountants utilize an understanding of business information and financial reporting systems, accounting and auditing standards and procedures, evidence gathering and investigative techniques, and litigation processes and procedures to perform their work.
Are There Differences? 15 The major difference lies in the focus. While some may focus on fraud, others may focus on money laundering. No matter the differences, adequate training and hands on experience will determine the level of expertise.
Who are Forensic Accountants? (Contd) 16 Forensic accountants are also increasingly playing more proactive risk reduction roles by designing and performing extended procedures as part of the statutory audit, acting as advisers to audit committees, fraud deterrence engagements, and assisting in investment analyst research. (Source Wikipedia)
Who is an Expert Witness? 17
Who is an Expert Witness? (Contd) 18 An expert witness is a witness, who by virtue of education, training, skill, or experience, is believed to have knowledge in a particular subject beyond that of the average person, sufficient that others may officially (and legally) rely upon the witness's specialized (scientific, technical or other) opinion about an evidence or fact issue within the scope of their expertise, referred to as the expert opinion, as an assistance to the fact-finder. Expert witnesses may also deliver expert evidence about facts from the domain of their expertise. At times, their testimony may be rebutted with a learned treatise, sometimes to the detriment of their reputations.
The Role of a Forensic Accountant as an Expert Witness 19 The principal role of a Forensic Accountant is to Analyze, Interpret, Summarize and Present Complex Business and Financial deals in a logical, understandable manner supported with facts. As an Expert Witness, the Forensic Accountant must (a) Investigate and Analyze Financial information. (b) Develop Computerized applications (if applicable) to Assist in the Analysis and Presentation of Financial information.
The Role of a Forensic Accountant as an Expert Witness (Contd) 20 Attend the Examination for Discovery to review the testimony, assist with understanding the financial issues and to formulate additional questions to be asked. Review of the opposing expert's damages report and reporting on both the strengths and weaknesses of the positions taken. Assist with settlement discussions and negotiations. Attend trial to hear the testimony of the opposing expert and to provide assistance with cross-examination.
Steps that the Forensic Accountant Should Follow 21 Meet with key individuals Discuss expectations Discuss fees and reimbursable costs Gather Evidence after meeting with key individuals Research Discuss with key individuals on information that was obtained after research Make any necessary adjustment to the facts, if any, after discussion with key individuals Write a formal report supported by evidence.
The Nigerian Factor Affecting the Role of a Forensic Accountant as an Expert Witness: 22 Environment Very weak infrastructure Weak judicial system Weak educational system Indiscipline Retards development Creates chaotic social or work environment Creates mistrust Retards spiritual growth
The Nigerian Factor Affecting the Role of a Forensic Accountant as an Expert Witness: (Contd) 23 Corrupting Tendencies Willingness to compromise Abuse of office Abuse of power Rule of Law Insincerity in application Justice delayed is justice denied Abuse of office Abuse of power
The Nigerian Factor Affecting the Role of a Forensic Accountant as an Expert Witness: (Contd) 24 The Nigerian Factor Lack of continuity Too much centralization of authority Too many Chiefs and not enough Indians Fiscal indiscipline Lack of transparency Institutionalized corruption Institutionalized money laundering Abuse of office Abuse of power
Thank You 25 Until we meet again

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Forensic Accountants & Money Laundering

  • 1. BY:- RAHUL MAGAN CHIEF EXECUTIVE OFFICER, TREASURY CONSULTING LLP COUNTRY DIRECTOR, INTERNATIONAL INSTITUTE OF CERTIFIED FORENSICS INVESTIGATIONS PROFESSIONALS, INC. COUNTRY DIRECTOR, ASSOCIATION OF CERTIFIED ACCOUNTING PROFESSIONALS 91-9899242978 , SKYPE ~ RAHUL5327 , TWITTER @ RAHULMAGAN8 EMAIL:- INFO@TREASURYCONSULTING.IN , RAHUL.MAGAN@TREASURYCONSULTING.IN 1 MONEY LAUNDERING: THE ROLE OF A FORENSIC ACCOUNTANT AS AN EXPERT WITNESS
  • 2. HISTORICAL PERSPECTIVE 2 Financial Action Task Force (FATF) 1. Formed by a group of seven industrialized nations in 1989 in Paris. 2. In 1990 established and issued its 40 recommendations. 3. Revised in 1996 and 2003. 4. Additional nine recommendations dealing mostly on measures to counter terrorism.
  • 3. HISTORICAL PERSPECTIVE (Contd) 3 Recommendation 26 and the evolution of the Economic and Financial Crimes Commission (EFCC). Nigeria. Called Financial Crimes Enforcement Network (FinCEN in USA), Financial Transactions Reports Analysis Centre of Canada (FINTRAC), Australian Transaction Reports and Analysis Centre. Many other countries have different names for it.
  • 4. HISTORICAL PERSPECTIVE (Contd) 4 Independent Corrupt Practices And Other Related Offences Commission (ICPC) Establishment Act of 2000 The Money Laundering (Prohibition) Act of 2004. The Economic and Financial Crimes Commission Act of 2004
  • 5. What is Money Laundering 5 Process of concealing Illegal source Application of income derived from criminal or illegitimate activity Subsequent disguising of the source of that income to make it appear legitimate Source: Association of Certified Anti-Money Laundering Specialists - ACAMS.
  • 6. What is Money Laundering (Contd) 6 Laundered money is like water, it seeks the path of least resistance (ACAMS). Initially, money laundering was associated with drug trafficking and organized crime, however, it has been expanded to include extortion, terrorism, official bribery and corruption, arms smuggling, white collar crime and many other crimes.
  • 7. The Three Stages: Placement, Layering and Integration. 7 Placement Placement involves physically placing illegally obtained money into the financial system or the retail economy. "Dirty" money is most vulnerable to detection and seizure during placement. (U.S. Financial Crimes Enforcement Network)
  • 8. The Three Stages: Placement, Layering and Integration (Contd). 8 Layering Layering is the separation of illegally obtained money from its source through a series of financial transactions that makes it difficult to trace the origin. During the layering phase of money laundering, criminals often take advantage of legitimate financial mechanisms in attempts to hide the source of their funds.
  • 9. The Three Stages: Placement, Layering and Integration (Contd). 9 Layering (Contd) A few of the many mechanisms that may be misused during layering are currency exchanges, wire transmitting services, prepaid cards that offer global access to cash via automated teller machines and goods at point of sale, casino services and domestic shell corporations lacking real assets and business activity that are set up to hold and move illicit funds. (U.S. Financial Crimes Enforcement Network)
  • 10. The Three Stages: Placement, Layering and Integration (Contd). 10 Integration Integration means converting the illicit funds into a seemingly legitimate form. Integration may include the purchase of businesses, automobiles, real estate and other assets. (U.S. Financial Crimes Enforcement Network)
  • 11. What is Forensic Accounting? 11 Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial.
  • 12. What is Forensic Accounting? (Contd) 12 All of the larger accounting firms, as well as many medium- sized and boutique firms, have specialist forensic accounting departments. Within these groups, there may be further sub-specializations: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims, fraud, construction, or royalty audits. (Source Wikipedia). Recently Forensic accountants have started to develop expertise in tracking laundered money. Nigerian Forensic accountants should lead the rest of the world in developing expertise in tracking laundered money. This has urgency written all over it since Nigerias economic growth has been hampered by corruption which is a form of money laundering.
  • 13. Who is a Forensic Accountant? 13
  • 14. Who are Forensic Accountants? 14 Forensic accountants may be involved in recovering proceeds of crime and in relation to confiscation proceedings concerning actual or assumed proceeds of crime or money laundering. Some forensic accountants are also Certified Fraud Examiners, Certified Public Accountants, Certified Money Laundering Specialists, or Chartered Accountants. Forensic accountants utilize an understanding of business information and financial reporting systems, accounting and auditing standards and procedures, evidence gathering and investigative techniques, and litigation processes and procedures to perform their work.
  • 15. Are There Differences? 15 The major difference lies in the focus. While some may focus on fraud, others may focus on money laundering. No matter the differences, adequate training and hands on experience will determine the level of expertise.
  • 16. Who are Forensic Accountants? (Contd) 16 Forensic accountants are also increasingly playing more proactive risk reduction roles by designing and performing extended procedures as part of the statutory audit, acting as advisers to audit committees, fraud deterrence engagements, and assisting in investment analyst research. (Source Wikipedia)
  • 17. Who is an Expert Witness? 17
  • 18. Who is an Expert Witness? (Contd) 18 An expert witness is a witness, who by virtue of education, training, skill, or experience, is believed to have knowledge in a particular subject beyond that of the average person, sufficient that others may officially (and legally) rely upon the witness's specialized (scientific, technical or other) opinion about an evidence or fact issue within the scope of their expertise, referred to as the expert opinion, as an assistance to the fact-finder. Expert witnesses may also deliver expert evidence about facts from the domain of their expertise. At times, their testimony may be rebutted with a learned treatise, sometimes to the detriment of their reputations.
  • 19. The Role of a Forensic Accountant as an Expert Witness 19 The principal role of a Forensic Accountant is to Analyze, Interpret, Summarize and Present Complex Business and Financial deals in a logical, understandable manner supported with facts. As an Expert Witness, the Forensic Accountant must (a) Investigate and Analyze Financial information. (b) Develop Computerized applications (if applicable) to Assist in the Analysis and Presentation of Financial information.
  • 20. The Role of a Forensic Accountant as an Expert Witness (Contd) 20 Attend the Examination for Discovery to review the testimony, assist with understanding the financial issues and to formulate additional questions to be asked. Review of the opposing expert's damages report and reporting on both the strengths and weaknesses of the positions taken. Assist with settlement discussions and negotiations. Attend trial to hear the testimony of the opposing expert and to provide assistance with cross-examination.
  • 21. Steps that the Forensic Accountant Should Follow 21 Meet with key individuals Discuss expectations Discuss fees and reimbursable costs Gather Evidence after meeting with key individuals Research Discuss with key individuals on information that was obtained after research Make any necessary adjustment to the facts, if any, after discussion with key individuals Write a formal report supported by evidence.
  • 22. The Nigerian Factor Affecting the Role of a Forensic Accountant as an Expert Witness: 22 Environment Very weak infrastructure Weak judicial system Weak educational system Indiscipline Retards development Creates chaotic social or work environment Creates mistrust Retards spiritual growth
  • 23. The Nigerian Factor Affecting the Role of a Forensic Accountant as an Expert Witness: (Contd) 23 Corrupting Tendencies Willingness to compromise Abuse of office Abuse of power Rule of Law Insincerity in application Justice delayed is justice denied Abuse of office Abuse of power
  • 24. The Nigerian Factor Affecting the Role of a Forensic Accountant as an Expert Witness: (Contd) 24 The Nigerian Factor Lack of continuity Too much centralization of authority Too many Chiefs and not enough Indians Fiscal indiscipline Lack of transparency Institutionalized corruption Institutionalized money laundering Abuse of office Abuse of power
  • 25. Thank You 25 Until we meet again