Financial Analysis in FCPA Cases

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This week I recorded a podcast for the International Association for Asset Recovery (IAAR), which is accessible on the IAAR site. We talked a bit about where financial investigations are going, and how I am using technology to complete these investigations quicker and more effectively.

David Quinones, host of the podcast and Editorial Director for IAAR, asked how a private sector forensic accountant fits into a Foreign Corrupt Practices Act (FCPA) case.

I talked about two ways that forensic accountants and fraud investigators can be utilized:

Investigating potential FCPA violations – When companies companies suspect that they may have an FCPA problem, they are required to initiate an internal investigation to determine what really happened.

The forensic accountant can examine the books and records in conjunction with bank records to see where money really went. If there is a discrepancy between what the bank says and what the accounting records say, there is usually a problem. For example, if the accounting records show a $25,000 payment to ABC Company for raw materials, but the check copy shows the $25,000 was really paid to John Smith, this is a red flag. Why have the accounting records concealed the true payee? This type of investigation is necessary to fully examine allegations of FCPA violations.

Forensic accountants are also necessary when complex transactions are involved. FCPA violations involving payments are not always so linear. There is often a complex web of payments and money transfers between a variety of individuals, entities, and accounts. The financial investigation requires expertise in unraveling these situations and tracing the money to prove fraud or malfeasance.

Part of a corporate compliance program – Companies must be proactive in preventing and detecting FCPA violations, and their compliance program is the answer to this. Whether a company has created a compliance program voluntarily, or is mandated to do so because of previous FCPA violations, a forensic accountant is again an important piece of the puzzle.  The forensic accountant can come in on a regular basis, such as once or twice a year, to do testing and examination of accounting and banking records to determine whether any further violations or red flags of fraud exist.

More information on the Sequence Forensic Accounting System can be found here, and you can see me demonstrate some of the results of this system in a webcast: Follow the Money–Using Technology to Find Fraud or Defend Financial Investigations.

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