How can we win ongoing war on murky world of financial crime?


April 21 2019
Deirdre Carwood, Irish Independent

Financial crime, is that fraud? This was a question I was asked after I said my day job is a financial crime investigator. "Yes," I said with conviction and then added, "Well yes and no."

If only it was that simple.

More than 20 years ago, I joined a big accountancy firm. I was young, ambitious and full of wonder for what was to come. Memories from my initial years as a forensic accountant include the investigations that involved counting things: petty cash, pigs, designer handbags, scrap platinum, bags of animal feed and my favourite, gold bars. I can't remember the last time an investigation I worked on actually involved a stock take.

That is because fraud has, without doubt, evolved beyond the traditional theft and misappropriation. What has now emerged is the murky world of financial crime spreading and morphing at great speed, fuelled by technological advances and the ambition and creativity of unscrupulous - and often cruel - perpetrators.

You could be forgiven for thinking financial crime is just a "buzz word" or a "concept" and not representative of an actual crime taking place. You'd be wrong. Financial crime underpins organised crime which drives human trafficking, drug trafficking, kidnapping and terrorism to name a few.

There is no single definition of financial crime in Irish law. Money laundering, bribery and corruption, cybercrime, handling the proceeds of crime, financial markets abuse, and accounting and tax fraud are all considered financial crimes. The list is endless and constantly changing.

At one level, financial crime is simple. If you take money laundering as an example, the criminal is driven by the need to access a financial system to launder the proceeds of crime.

They will take the easiest route to do so, often using technology to improve the speed at which the transaction takes place or to increase the volume of illicit proceeds being laundered.

Every evolution in the financial economy presents new opportunities and techniques for them to exploit.

Rapid development of enabling technology, the internet, online banking and shopping, mobile and flexible payment channels and more recently, cryptocurrencies, have created potential new vehicles for criminals to abuse.

While there has been an acknowledgement in the past that financial crime primarily impacted financial services, today all organisations, no matter the industry, are exposed. Tightening regulation, growing customer demands for integrity, transparency and increasing criminal sophistication are creating the perfect storm.

So, what action is needed?

There is a strong call from customers, regulators, shareholders and society at large for business leaders and boards to seek out effective strategies to protect their organisations from from monetary and reputational loss.

The vast organisational complexity of global corporations increases the threat of financial crime simply by virtue of their size. The real issue is not that management is undertaking and hiding illicit activity, but that companies are not well equipped to collect, share, monitor, and analyse the data which provides the warning signs.

New technologies can help, yet investigation professionals may not know how to use, or may resist new technology. Expertise is also an issue. An organisation that hires data scientists to conduct fraud analysis may discover they can crunch numbers but lack critical knowledge to interpret the output.

Nevertheless, ongoing scrutiny and awareness is what is needed. Right now, our focus should be on using technology to reduce manual and duplicative processes, shifting valuable resources from repetitive review processes to areas requiring the judgment and decision-making capabilities unique to humans.

At Deloitte, we continue to fight the good fight for our clients. We are a team of accounting, compliance and tech specialists who ultimately have an innate sense of right and wrong. This drives our need to find a solution, even if the goal posts keep moving.

ofinally, a smile appeared on my face recently when I saw the results of a study by the Association of Certified Fraud Examiners on fraud.

Traditional fraud still exists globally. In fact 89pc of the traditional frauds surveyed related to theft of assets. My stocktaking experience may come in handy yet. Bring on the gold bars.

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