When the FIFA corruption scandal hit the news, did you think about accounting? No? Believe it or not, accountants are the unsung heroes of news stories about money scandals. Who do you think gathers the evidence for the local prosecutor or, in this case, the Department of Justice? The “heroes” are specialists called forensic accountants.
The Association of Certified Fraud Examiners’ website says that forensic accountants “combine their accounting knowledge with investigative skills, using this unique combination in litigation support and investigative accounting settings.”
In plain language, a forensic accountant possesses the knowledge to recognize unusual, unsubstantiated financial activity that indicates illegal or non-compliant acts. Forensic accountants dig into records and track every item. All work is meticulously documented so it can be entered into evidence.
The FIFA corruption scandal employed four methods that forensic accountants look for when they are “digging”:
Agreements exist to arrange for goods or services in return for payment. What better way to get money from an organization than to set up fictitious agreements and start sending invoices? It could happen — if the right approvals, due diligence and separation of duties aren’t in place.
Generally, fake companies can be used to move larger amounts of money than payments to fictitious vendors. Setting up a fake company and related bank accounts is a lot of work. The work is worth doing, though, if there a lot of money to hide.
Multiple bank accounts
Using lots of bank accounts instead of a few can provide hiding places for money, keeping it invisible from regulators and others. Foreign bank accounts may be legitimate, or they could be used to shift assets and income away from view. Organizations that rigorously control their bank accounts shut down malicious activity.
Transacting or depositing large amounts of cash is strictly regulated. Splitting cash deposits even draws attention. So what can you do? Smuggle the currency in luggage or on your person. As long as it’s never deposited, the money is very difficult to track down.
So remember – the next time a money scandal hits the news, think about accounting. You might also want to think about getting a forensic accounting review. Just in case someone in your business gets any ideas from the FIFA scandal.