Forensic analysis services aid in qualifying and investigating financial statements and databases. It facilitates forensic investigators to prove suspected crimes, preventing illegitimate financial transactions. Financial institutions, primarily banks, deal in public money, but unfortunately, they are the most vulnerable to receiving illegal money from legitimate-appearing businesses. Therefore, they need to apply robust preventive measures to monitor scams and prevent the perils. Unknowingly violating relevant rules and regulations makes them a part of money laundering, which is harmful to their finances and reputation.
Here, we propose forensic analysis for financial institutions, monitoring their database regularly and identifying suspected transactions in time. Let’s see how forensic analysis is vital for financial security.
What does Financial Forensics Involve?
The financial industry comprises people in various roles, ranging from portfolio managers and bank tellers to financial forensic analysts. Professionals in the forensic part ensure financial organizations and people handle finances legally. They investigate and work with numbers to combine investigation with accounting.
The primary purpose of financial forensics is to discover and gather evidence of money laundering and other criminal activities involving money. It investigates an individual’s and organization’s finances to determine their management strategy. Financial forensic analysis services help recover lost money and prevent financial crime. These professionals also help investors find lucrative investment opportunities by determining their actual value.
Instances When Financial Forensics Analysis Delivers Maximum Value
Here are a few instances when financial forensics delivers maximum value:
Money Laundering: Money laundering involves making money through illegal routes that look legal. For instance, when a person steals money, invests it into a legal business, and deposits its legal profits along with illicit cash into a financial institution, the bank unknowingly uses illegal funds and becomes a part of money laundering. Financial forensic analysts evaluate the company’s documentation, monitor significant income changes, and flag any suspicious or inexplicable transactions to detect such activities.
Financial Theft: A financial theft takes place when an employee, individual or customer steals money from a company. For example, an employee may steal money from a company’s cash register. Financial forensic analysts study the event and find evidence of financial theft in profit or loss statements, receipts, and other documents.
Securities Fraud: It is a kind of white-collar crime that occurs when a stockbroker presents incorrect information to the investors. For instance, a stockbroker may give false information and mislead clients into investing money in a particular company. Both brokerage firms and investment banks may commit such crimes on an individual or organizational level. Financial forensics analysts search through stock transactions, communication records, and other documents to determine who committed the fraud.
Divorce Proceedings: While handling a divorce, an attorney determines each party’s finances to ensure a fair division. A party may hire forensic analysis services to research the opposite party’s finances and ensure they provide all the required information. To complete this research, they look into their bank statements, tax returns, and investment statements.
Corporate Valuation: Financial forensics professionals analyze a company to measure its value. For instance, the acquirer would want to know the organization’s exact value while acquiring a business. A forensic analyst can help determine the organization’s finances deeper than what is available to the public. It helps ensure that an investor buys the company at a fair price without any hidden issues.
Tax Evasion: Tax evasion takes place when an organization or individual avoids paying taxes. For instance, an organization may try to hide its profits to avoid paying taxes on them. Forensics analysts study the company’s tax documents, financial transactions, and profit-and-loss statements to determine if it committed tax evasion.
Terrorism: Intelligence agencies like the FBI and CIA often use financial forensics to expose terrorism. Since terrorist groups need funds to exist and operate, forensics is an effective measure to expose terrorist cells. Forensic experts design auditing and accounting systems to identify, reduce, and manage risk. It has become increasingly important as crime prevention is more crucial than discovering it later.
Financial forensic analysis services are similar to forensic accounting, which utilizes auditing, investigative, and accounting skills to analyze financial statements and identify fraud with legal action. They examine a company’s or individual’s financial statements to pinpoint financial crimes like tax fraud, insider trading, market manipulation, money laundering, and scams. The objective is to discover crimes, prevent them, and report them correctly. If a financial fraud has occurred, forensic experts also help recover the stolen funds.
