Category Archives: The Nitty Gritty

All Over This One


In the United States, bribery of a public official is illegal. Public officials, on a state, local or national level, tend to hold a lot of power. It would not be right to allow those among us with deep pockets to use the contents of said pockets to get unfair benefits, such as no-bid contracts, tax breaks and “get out of jail free” passes. In 1977, the Foreign Corrupt Practices Act (FCPA) made it illegal for U.S. persons, companies and their subsidiaries to bribe foreign government officials. The FCPA was further amended in 1998 to apply to foreign people and companies whose payments pass through the United States. The FCPA also applies if a foreign party authorizes a bribe via an email that is stored on a server in the United States. It is a far-reaching law with two main provisions – an anti-bribery provision that is generally enforced by the U.S. Department of Justice (DOJ) and accounting and record-keeping provision that is generally enforced by the Securities and Exchange Commission (SEC).

A huge incentive to not violate the FCPA is the severity of the punishment. The criminal and civil fines for violating the FCPA apply to companies and individuals alike. Companies can be fined up to a maximum of twice the benefits sought by the bribe. For individuals, fines can be up to $5 million and 20 years in jail. Fines and jail time can apply for either the corrupt payment or violation of the books and records provision. In addition to the fines, companies may also receive sanctions such as the loss of export licenses and disqualification from U.S. government contracting. For example, in 2008, Siemens was fined more than $1.3 billion by the DOJ, the SEC and German regulators and, more recently, Walmart is under investigation for bribery of officials in Mexico, China and elsewhere.

To avoid the fines and jail time, individuals and firms must comply with both provisions of the FCPA. The first, bribery, seems straightforward but I shall go over it so we are clear.

  1. Do not make payments to public officials in order to get special favors. An officer at state-owned entity is also considered a public official. It is safest, and ethical, to not pay bribes to anyone. However, be mindful of the fact that bribes of public officials will get you into the most trouble.
  2. If you invite public officials on a trip to show off your business or to a conference, do not throw in extras, such as a trip to Disneyland for their family. Keep it all above-board and about business.
  3. “Gifts” such as watches that costs thousands of dollars or a suitcase of cash are taboo.
  4. Payments related to the political campaigns of foreign governments are also not allowed.

The accounting provisions are where the forensic accountant is very active, working for both the companies and for the DOJ and SEC. Corporations covered by the FCPA are required to make and maintain books and records that accurately and fairly reflect their transactions and to devise and keep a sufficient system of internal controls. This is so that government agencies inspecting the books and records of the corporation will be able to easily see that the corporation is in compliance with the anti-bribery laws. The controls are so that the employees of the corporation do have the opportunity to commit fraud or bribery. When companies and individuals are paying bribes to public officials, it is highly likely that they will try to hide these transactions in their ledgers so they are not immediately identifiable as illegal transactions.

Companies with international operations will often have a department that review the books and internal control systems to ensure that they are complying with FCPA provisions. From time to time, the company may call in a forensic accountant to perform an internal investigation. This may happen either because the company suspects that untoward behavior has occurred or as a periodic review of their books and systems.

The DOJ and SEC will also employ the services of forensic accountants when they investigate companies and individuals that they suspect of violating the FCPA. When cases like this happen, there will be forensic accountants working for both the government agencies and the entity being investigated. In addition to discovering whether or not bribery has occurred, the company and the government agencies seek to determine the extent of the violations and determine the value of the gains realized and, therefore, the fines and other penalties to be levied by the government and avoided by the corporation. These investigations can be very extensive and span several continents, depending on the size and reach of the corporation. Financial forensic experts are instrumental and very involved in these investigations, tracing payments and working diligently to find what the corporation has tried to hide both on and off its books.

Often, an element of a FCPA settlement is the appointment of a multi-year monitor. This happens after the investigation and is an area where forensic accountants can use their expertise to examine the company’s control environment and record-keeping and assess the progress the company has made toward compliance with the law.

In recent years, the DOJ and the SEC have become very aggressive about enforcing the FCPA. In addition to this, other nations have enacted their own anti-bribery laws; the U.K. Bribery Act of 2010 has been in force since July 2011 and criminalizes bribe payments to private individuals as well as government officials. Also, there is more and more international cooperation in the investigation and enforcement of this law. Through it all, the work and expertise of financial forensic experts are extensive and vital. A lot of big firm lawyers think of the FCPA when they think of forensic accountants. It is indeed one of the many places you will find the financial forensic expert.

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Money For Nothing


A few weeks ago, a story broke about arrests made related to a series of incredible ATM heists. A group of criminals struck twice, in over 25 countries and took in over $45 million. The thefts were incredible, not only because they took in so much money, but also because of how well-executed they were, with the thieves striking quickly and efficiently, in so many cities across the globe. How were they able to do this?

They began with prepaid debit cards. Computer hackers hacked into the systems of two prepaid debit card processors and stole debit card numbers. The first time they stole five prepaid debit card numbers from a processor in India and the second time they stole twelve account numbers from a United States based processor. After stealing the numbers, they raised the limits on the debit cards, or removed them completely. This was possible, in part, because prepaid debit cards start out as a blank slate, unconnected to an individual’s account. The limits are set by the amount of cash paid into the account. This information is what was manipulated by the hackers. The hackers then sent the card information to their team members who were scattered around in over 25 countries around the world.

In the same way that a hotel programs a key card for a guest’s room, these criminals programmed the magnetic strips on blank cards, using a machine known as a skimmer, and cloned the prepaid debit cards. In fact, even hotel key cards can be used to clone debit or credit cards, as the technology used to create bank cards is the same technology used to make hotel room cards – not very comforting, is it? Finally, armed with cloned prepaid seemingly limitless debit cards, teams went out onto the streets and withdrew cash. A  lot of cash. During the first heist, using five prepaid numbers, the thieves withdrew $5 million from ATMs in 20 countries. During the second heist, using twelve prepaid accounts, the thieves withdrew $40 million from ATMs in 26 countries in under 10 hours. This is not the first time that this has occurred – theft using prepaid debit card information has happened several times – but this is the grandest scale to date. In a highly coordinated and organized action, the teams of people went from ATM to ATM, swiftly withdrawing funds. They knew which ATMs had the highest maximum withdrawal limits and they knew the most efficient routes to take in order to maximize their intake in the least amount of time. The New York Times reported that from the ATM cameras, one can see a crew member’s backpack getting heavier and heavier, as he went from one machine to the next. There is something to be said for the criminal network; reporting on the shutdown of Liberty Reserve stated that the ATM thieves laundered some of their ill-gotten gains through the shady currency exchange business. When MasterCard, noticed that something was amiss with their prepaid debit cards, they contacted the Secret Service who, among other things, investigates various financial crimes.

The thieves likely targeted prepaid debit cards because of several weaknesses that they were able to exploit. Regular debit cards are connected to a person’s checking account meaning, generally, that a thief is limited to stealing the victim’s checking account balance and not much more than that. A credit card, though a thief can try to go to town with it, is connected to individuals who will notice pretty quickly if a lot of money is taken out of their account. Also, because credit cards come with the history of the user, credit card companies tend to flag them if they notice behavior that is out of the ordinary. The prepaid debit card is a different animal. Prepaid debit cards are a very convenient way for people, who do not wish or are unable to use bank accounts, to go cashless. For a small fee, cash is simply loaded onto a card that will then work as a regular debit card, until the money pre-loaded onto the card is used up. Because it is not connected to a person’s account or spending history, if this card is manipulated, it will take a while before anyone notices that something is amiss.

Because of the nature of the prepaid debit card – that it is not connected to an individual’s account – the thieves needed to steal only a few numbers and raise the limits on a few cards to very high levels. Because only a few were taken, again, it decreased the risk of the theft being immediately noticed. When credit or regular debit cards are stolen, thieves tend to have to steal great numbers of them if they want to make a lot of money out of them. Once a lot of cards are stolen, the chances that someone will notice go up a lot.

As I mentioned before, debit and credit card technology itself is not secure. The magnetic strip technology used on credit and debit cards in the US, is the same technology used to program hotel room keys. The technology has not changed in decades and the machines used to clone credit and debit cards can be bought for $25. The US is the only nation in the G-20 that still uses this magnetic strip technology. The other members use newer chip technology that is more secure.

There are several benefits to the prepaid debit card, some of which are:

  • They can be cheaper for some than having to pay all the fees involved in having a bank account;
  • Despite the skimming and cloning risk, they tend to be safer than holding large amounts of cash;
  • They are good for travel, especially since traveler’s checks are no longer as widely accepted as they used to be and debit cards can be used wherever credit cards are accepted;
  • They are great gift cards as they are not limited to a particular vendor.

One challenge for the issuers and processors of these prepaid debit cards is to make them more secure so that they do not end up losing more and more money to heists such as these ones. Though US banks may believe that newer card technology is too expensive, as thieves steal more and more, they may decide that the benefits of the technology outweigh its costs.  There is also the challenge of protecting the banks and processors against hackers. There have been arrests of the team members who made the ATM withdrawals, and one has even been found shot dead, however the hackers are still at large. They are probably the most dangerous, for without them the prepaid debit account information could not have been stolen and manipulated. That is an ongoing battle that financial institutions and law enforcement fight; as our systems become more sophisticated, so too do cyber criminals.

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So Fresh And So… Not Clean


Last week, online currency exchange, Liberty Reserve, was shut down, several individuals were arrested and an indictment was filed by the United States Justice Department in New York. filed and indictment accusing six individuals of, among several other things, money laundering. Media outlets all over keep throwing out that term but how exactly does money laundering happen?

In the United States, money that is earned, whether by legal or illegal means, is subject to taxation. Al Capone went to jail, not for the many (as I gather from watching Boardwalk Empire) people he killed and his unlawful business ventures but for tax evasion. When the government sees you spending money and you do not give them a reasonable reason for your having that money, they will work hard to find out just where your money is coming from. However, if they find out that this money comes from illegal sources, they can arrest and prosecute you for your unlawful activities. This is where money laundering comes in. People who make money via illegal methods, find ways to make their money look clean, as though it came from lawful sources. How does this happen?

  1. The first step in money laundering is referred to as placement. At this stage, money is put into the financial system. This can be risky as US banks are required to report large cash deposits, and wires and checks contain the payer’s information and are, therefore, quite traceable. This is where Liberty Reserve was very handy. First of all, the only honest information Liberty Reserve required from an account holder was an email address. Although they requested a name and birth date, none of that information was verified. This gave the account holders anonymity. Also, Liberty Reserve did not accept money directly from users. Instead, users took their money to approved exchangers who then issued LR currency, Liberty Reserve’s currency. These exchangers were located in countries with little or no oversight over their financial systems, such as Malaysia and Vietnam, so questions were not asked about where the money came from. This LR currency was then deposited into the users’ Liberty Reserve accounts with no clear path to where the money originally came from.
  2. The second step in money laundering is layering. During this phase, money is moved around, through many different sources, in an attempt to make the money difficult to trace. Under ordinary circumstances this involves moving funds from one bank account to another, generally in different countries and in varying amounts, buying expensive items and then selling them and changing money from one currency to another. The goal is to make the money’s path as complicated and difficult to trace as possible. Liberty Reserve made this relatively simple. Money going into a Liberty Reserve account holder’s account was already pretty anonymous and difficult to trace. Funds could then be moved, as LR currency, between various anonymous Liberty Reserve accounts. The sources of the funds became near, if not totally, impossible to trace, without having to go through the complications of multiple bank transfers through different countries and bank accounts.
  3. The final step in money laundering is integration. Here, the money re-enters the economy, disguised as coming from a legitimate source. The funds are transferred into a business that is probably a front for the illegal business but now that its origin has been disguised, it appears to be coming from a legal source. In the case of Liberty Reserve, the LR currency was transferred to money exchangers who converted the LR currency back to US dollars and then moved that money to wherever it was the Liberty Reserve account holder requested.

It is pretty clear just how handy Liberty Reserve was to those involved in illegal business and wanting to launder money so that it looked clean. By removing identification and making money transactions anonymous, placement and layering of dirty money a far less complicated endeavor than it tends to be. It is not surprising that Liberty Reserve had over a million users, 200,000 of which were in the United States, and that over $6 billion went through its system.

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Money Trails


I mentioned, last week, that I traveled to Zimbabwe and Mozambique. After my experiences during this, and our previous trip, in 2010, I am now pretty convinced that the government system and most companies were created by old school accountants and that very little has changed since then. It is a great reminder of how important having a good financial control system is. In our mostly virtual and paperless modern transactions, people tend to think less about how a transaction can be traced. Not so long ago, when business was more manual, it was easier to see the path a transaction took from inception to completion. One could refer to a stack of papers to see who gave their okay to a process. The separation of duties was also much clearer as documents tended to be manually moved from one place to another, or employees had physical custody over paperwork. These days, as these systems and documents have disappeared into the computer and cloud, it has become more challenging for those running corporations and institutions to think through a process and determine adequate controls and paper trails, virtual though they may be.

However, in Zimbabwe, often transactions are quite manual and, even when they are not, they are quite involved and can involve a lot of paperwork. I mentioned getting my prepaid phone line – let me tell you the process:

  1. I first had to provide a copy of my identification and fill out an application form for a SIM card. This means that it would be pretty impossible to have one of those crime show episodes where the trail for a criminal goes cold because everything was done using prepaid phones and so no one knows who the line was purchased by.
  2. I took this form to the cashier who gave me a receipt for the one dollar I had to pay in order to buy the phone line.
  3. I then took my receipt to a customer service representative, who was sitting in the booth next to the cashier’s. The representative gave us a SIM card and activated the phone line for us. We then needed air time.
  4. With proof of our activated phone line, we then went back to the cashier and paid for air time.
  5. We left the phone store with a phone line, air time and a bunch of receipts.

Our experience was similar at the border, when traveling from Mozambique to Zimbabwe – we gave payment to one person, were issued a receipt and then and received our visa from another person. As frustrating as it was to walk back and forth in order to get through the process, it was fascinating for me to see the clear separation of duties and the generation of a paper trail.

Most fun was when we received our gifts after our wedding. The afternoon after the wedding, my aunt and cousin came by with an envelope of money and the personalized gift receipt book you see above. It turns out that, during the reception, a team of wonderful volunteers, sat at a desk and received gifts from wedding guests. They then placed a piece of carbon paper (who knew that still existed) between two pages of the receipt book. After filling out the details of the receipt, they tore out and gave the original to the guest (as proof that the volunteers had received the funds) and the carbon copy remained in the prenumbered guest receipt book. Yes, numbered receipts for wedding gifts – who knew?

It is fantastic that many processes have become automated and that transactions are now completely more quickly and, hopefully, more efficiently than years ago. It is important, however, to make sure that controls and safeguards are not sacrificed in the name of efficiency. The separation of duties may feel tedious but having more than one person involved in a process means that, if one person is flouting the system and perhaps even misappropriating assets, there is at least one other person to blow the whistle on what is going on. Having an audit trail (paper or virtual) can seem overly meticulous until one needs to determine whether a transaction is valid. Creating, monitoring and maintaining a strong financial system is a much better proposition than trying to recover assets and rebuild a business after a fraud has occurred.

Also, you could get a lovely, personalized gift receipt book as part of the deal.

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Hey, That’s My Stuff!


I have written before about the fraud triangle and how the three elements, pressure, opportunity and rationalization, tend to be the factors that drive a person to commit fraud. Well, a few days ago, my husband and I were talking about Scott London and his insider trading charges. We began discussing the issues in relation to the fraud triangle – what was the pressure that he felt and how did he rationalize his actions? The opportunities for him to pass information on to his friend were, as far as he was concerned, quite plenty as he was operating outside of the system in which he worked and its established controls. However, he had not fully factored in the FBI and the SEC and their activities to attempt to thwart fraud.

My husband then said – but how do you really take away the opportunity? I don’t understand how you can really stop someone from trying to steal. That is true, however, you can put in safeguards to make it very difficult for the theft to occur, I responded. My husband, a photographer, is in the process of moving into a new studio space so I decided to use this as a way to explain my point.

Before moving his equipment and furniture into the space, my husband spent a lot of time thinking about the security in the building he is moving into. He walked around the premises, noting where the security office was located, in relation to his studio; he took a look at the various points of entry into the space and assessed how easy it would be for someone to gain unauthorized access; and he looked at the building and what security it came with. Armed with this information, he then sat down and made a plan. He researched alarm systems, door and window locks and various barriers to entry of his studio. Also, within his studio, he took steps to further secure his equipment with lock-boxes, storage containers and other measures. This, I told him, is how you attempt to take away the opportunity. He could have moved into the office spaces as is, without taking any steps to secure his space and its contents, but he did not. He took the time and energy to dissuade a potential intruder from entering his space. By making it as difficult has possible for someone to get into his space, he is working to break the triangle.

Controls to protect ones assets can be physical, as with the studio space, or procedural, as with an authorization process for processing checks in an accounts payable department. In both cases, they are very important when it comes to trying to break the fraud cycle and prevent theft, insider trading or whatever the crime of the day is.

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Ready For The Job


Early this week, I read an article in the New York Times about a fee dispute between the law firm, DLA Piper and Adam H. Victor, an energy industry executive. DLA Piper is accused of overbilling, a practice referred to as “churning”. The story sparked off  discussion about the billable hour regime and ethics in law firms, DLA Piper in particular. It is a shame that the actions (and emails) of this firm and a few others, tend to sully how people view firms that work on a billable hour basis. However, this article had me thinking about something else – the varied tools used by lawyers and litigation support, including forensic accountants.

The general expectation when one hires an accountant, forensic or otherwise, is that the only items one needs to hand over are financial records. This is an erroneous assumption. In order for a financial forensic expert to adequately investigate a case, the expert often must look beyond the numbers to discover what happened. A forensic accountant’s investigations may include interviewing employees at a workplace, reviewing contracts and, yes, sifting through emails.

For example, when investigating possible fraud in a company, and interview may bring forward a whistleblower. The whistleblower will provide valuable information that goes a long way toward uncovering fraud. Almost always, the perpetrator of fraud goes to great lengths to hide their crime. The interview process can help gather information that may, for instance, expose where improper entries are being made to financial records in an attempt to hide fraud. A good forensic accountant will know to ask questions that lead to information that an interviewee may not even know is relevant. Sometimes, a skilled forensic accountant will get the perpetrator of a fraud to implicate themselves. Armed with the information gathered from interviews, the forensic accountant can then better follow this information to an audit trail and obtain corroborating evidence.

So, when you are dealing with a forensic accountant don’t put them in a box and assume they only need financial records. You will most likely find that they are looking in more places than you could imagine financial fraud could hide.

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Who You Gonna Call?


After watching more television that I am sure is healthy, I often worried about who I might call should I need to say, “I’d like my lawyer.” My work as a CPA, in general, and specifically as a forensic accountant has helped me realize that there are many different situations in which a lawyer can make life a lot easier (and they are not always terrible situations). Just last week, I was talking about the importance of seeking out a qualified professional. It is important to have an idea what kind of help you need so you get the right professional for that need.

It is mind-blowing how many types of lawyers there are. Lawyers may specialize in criminal law, family law, mergers and acquisitions. You can call them to help you put together a lease and you can call them to help you decipher a lease. They can be the expert you hire when you are establishing a business or if you are trying to dissolve a business. In all these, and the countless other situations that are connected to the law, hiring a good lawyer who has knowledge and experience in the matter at hand could save you money and stress in the future. It would not be wise to hire a property lawyer to represent you in a criminal case and vice versa.

In addition to knowing the law, good lawyers will recognize when they need to work with an expert. For example, in the dissolution of a business, lawyers will call upon a business valuation expert. The lawyers may know the legalities involved in the dissolution but the lawyers also know that, in order to best serve their clients, they need to engage the services of a qualified financial professional. The relationships between lawyers and experts, including financial forensic experts, is a very important one. It is important for all parties involved in a legal matter to understand what everyone brings to the table.

Because a lawyer advocates for their client, the lawyer is who you need when you need a friend. Your lawyer will work very hard to best represent you. Your lawyer’s goal, in a nutshell, is to resolve the matter in your favor. In the process of giving you the best representation, your lawyer may call upon an industry expert. In financial matters, this expert is likely to be a forensic accountant and probably one who is certified in financial forensics. Because a forensic accountant advocates for the truth, the lawyer will engage the forensic expert to find and present the truth in your case. The forensic accountant deciphers complicated financial issues, seeks out the truth in those matters and presents them in a straightforward manner that is suitable for a court of law. Your lawyer, your friend, will find you a well-qualified expert who will take your complicated legal issue and present it as a set of uncomplicated, unbiased facts. In this way, your lawyer and the forensic experts that your lawyer engages will work together on your legal matter.

So when you need someone on your side, call your lawyer. Your lawyer will work hard to get the truth of your case out in a clear and uncomplicated manner. The best lawyers will know to call unbiased, qualified experts who will advocate for the truth and know how to make the truth clear, properly supported and at a standard acceptable in court.

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On Your Honor?

Earlier today, I ran the NYC half marathon. It is an amazing race that involves some of the best aspects of Manhattan. We begin by running around Central Park, a route that takes us past famous (and maybe just famous to runners) landmarks such as Strawberry Fields, the Boathouse and Cat Hill. We then exit the Park at Seventh Avenue and run through Times Square all the way to 42nd Street. This is the third time that I have run this race and running through Times Square still excites and thrills me. I run down the middle of the street, relishing the lack of traffic and feeling as though I am running away from zombies in a post-apocalyptic time. We hang a right at 42nd and head out to the West Side Highway. We race all the way down the West Side Highway and the race ends at South Street Seaport. However cold and painful the run may be, the route is an amazing and beautiful one and always well worth running. That said, throughout the race, as I took in the sights and sounds, I also noticed another thing. Security.

There are many measures that the New York Road Runners Association takes to keep runners honest. When I went to collect my bib and tracking tag, I needed to present identification as proof that I was who I claimed to be. During the race, there were several points on the course where the data on our trackers was collected. This data was collected as a safeguard against cheating by, say, taking a train or cab over a section of the race. There were also various marshals and police officers along the route keeping track of runners and supporters. I came home and I read about ex-white collar criminal, Amy Wilson. I thought about how curious it was that a running race had so many controls to minimize the risk of cheating, but the company where Wilson worked had very few controls to protect its assets.

One way to help protect a company’s assets is to recognize the fraud triangle and institute measures to break the cycle. In the story of Amy Wilson, all three aspects of this triangle are apparent. Initially, her son was arrested and jailed. Ms. Wilson felt under pressure to save her son and did not feel she could turn to anyone for this help. She decided she needed money to hire a lawyer, money that she did not have. Because controls over the financial systems were weak, she had the opportunity to write fake checks. Even after she helped her son out with his legal issues, Wilson continued to steal from her company. She rationalized her crime by working long hours and by telling herself that she was merely “borrowing” the funds from the company.

The most direct way for a company to break the triangle is to install appropriate and adequate controls in their financial system. An important one is the separation of duties. An example of the separation of duties is to have one person approve payments and another reconcile financial records. Another control is the review of financial ratios and the investigation of variances. There are more and a financial expert can recommend some that are both effective and economical for the company concerned.

Even if a company hires the best people in the world, working on the honor system is not a smart approach to business. One can never know when an employee will have a financial problem and feel pressured to try to come by finances that they do not have. It is smart to take away the opportunity for the employee to act on this pressure. Perhaps, instead, the employee, without the opportunity to commit fraud, will seek more honest resolutions to his or her problem.

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Be The Spider

ImageIt has been over three months since Sandy hit the Northeast, bringing unimaginable damage to New York and New Jersey and there are people who are still struggling to recover and rebuild their lives and homes. A lot of the challenges are related to delays in receiving insurance payments. It is already a stress to go through the trauma of a storm that destroys one’s home. The process of repairing the home and dealing with various insurance companies can become an overwhelming second job. In a situation like this it may be advisable for a property owner to seek the services of a forensic CPA to help navigate the insurance claim process.

There is a lot involved in filing an insurance claim and, in the case of events like Sandy, it is even more involved because there are different types of potential claims involved – FEMA, flood and wind, to name a few. Those filing claims will deal with their private insurance company (for their homeowner’s policy) and with the federal government (for FEMA and the National Flood Insurance Program). The probability of a smooth and successful experience is improved when the homeowner has knowledge of, or is working with someone who has knowledge of the insurance process. This is where a forensic accountant comes into play. There are a lot of parties at the table when filing an insurance claim including claims adjusters, engineering experts and construction experts and it is helpful to the homeowner to have a party overseeing the different players.

First, it is vital to understand the insurance policies and know what kind of coverage they offer. FEMA, for example, will help with minor repairs and temporary housing but FEMA is not where one should turn to rebuild a home destroyed by flooding. The National Flood Insurance Program (NFIP) is the program that provides flood insurance, through private insurance companies. Knowledgeable due diligence is necessary to make sure that the collection and submission of data to the insurance companies is done properly. After a large disaster, the insurance companies are inundated with claims and this means that a claim that is filed properly is more likely to be processed more quickly than claims containing not enough or extraneous information. A forensic accountant can help a claimant determine what the insurance company requires, what is relevant in order to file a claim and why the information is being submitted. In this way, the submission of information will be worthwhile and not just a process of checking boxes and giving the insurance companies all the information one has in the hopes that it will work.

Another thing a forensic accountant can help a property owner with is making sure that there is no crossover with claims. A claim to FEMA should not also be made to the NFIP and a claimant should be sure to use the correct entity’s forms when filing their claims. FEMA forms are to be used to file FEMA claims and NFIP paperwork should be used to file flood insurance claims. Administrative errors can create massive delays that serve only to make a stressful situation even more painful.

Having the right professional, an objective and realistic forensic CPA, helping drive the process can make a huge difference when filing an insurance claim. The forensic accountant can help the property owner make the most representative claim and not just push for the biggest number without a good basis. The claim process is a labor intensive process that involves an incredible number of documents and it is a process where the time, effort and documentation are severely underestimated. It is very easy for the property owner to get caught up in a web of paperwork, phone calls that seem to go nowhere and bureaucracy. A knowledgeable forensic accountant can minimize the frustrations and help put the property owner on top of the situation.

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Mind the Gut


I was watching an episode of Bones the other day, whose title character is Dr. Temperance “Bones” Brennan, a forensic anthropologist. On this show, Dr. Brennan is pretty much always pushing the power of evidence and science. When members of her team try to jump to conclusions, she berates them and insists that they must follow the evidence. Even when she is asked by those wishing to quickly find someone to blame for a crime, she brushes them aside and tells them that they must wait until she has gathered adequate information to form an opinion.

The episode I was watching was different from the usual. In this episode, Dr. Brennan decides to follow her gut and find the evidence to prove her case. This got me thinking about the the work that a forensic accountant does, as these things tend to do. When a forensic accountant is called in to work on a case, it is very important to balance evidence and intuition (the gut).

It is very important to be attuned to what is going on around us and to take note of red flags that indicate that there may be fraud or some other misdeed. Common examples of red flags in a financial arena are an employee living beyond their apparent means (the administrative assistant who just bought a Porsche) or the unapproachable coworker who never takes a vacation (no one checks his work). When reading about cases of fraud that have gone on for several years, I often wonder why people did not heed the signs. “Didn’t anyone wonder where she got the money for her expensive clothes and bags,” I have exclaimed at the radio and whomever is around. “So, this guy was the only person who knew how to process the payments and no one ever checked his work?” I say this but I also understand that, when in a situation, it is often easy to ignore or explain away the red flags. As a forensic accountant, it is vital to the job to be aware and sensitive to these signs.

That said, it is equally important (if not more so) to gather and analyze data. The gut feelings should help give the forensic accountant direction in the investigation. However, the forensic accountant cannot reach conclusions based on gut feelings. The conclusions reached by a forensic accountant must be suitable for a court of law (which is what forensic means) and, thus far, gut feelings are not considered suitable.

On Bones, Dr. Brennan did gather the evidence required to nab her suspect. Her gut was right and served to keep her dogged in her search for facts and the truth. And that is what being a forensic professional is about, after all.

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