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What are the most common cases the forensics team at GHJ works on?

We can divide our practice into two broad areas: Forensic investigations and litigation support.

Forensic investigations involve assisting companies to analyse allegations of wrongdoing. This could involve fraud, theft of cash or other assets and other misconduct, but can also include financial mismanagement, financial misreporting, as well as a review of the company’s internal control procedures. In these matters, we are generally engaged by the board of directors or senior management to provide clarity and solutions to the issues on hand. For example, if we are asked to investigate an allegation that someone has “cooked the books”, the question we would investigate may be:

  • Who cooked the books?
  • When were the books cooked?
  • How much were the books cooked?
  • How do we un-cook the books? Procedures for resolving thesematters may involve but are not limited to performing analytical procedures, interviewing key individuals, reviewing complex accounting data, and reviewing specific transaction details. For instance, various analytical procedures allow forensic accountants to identify unusual or unexpected trends that would otherwise be obscured in thousands or more complex transactions.

Common types of analytical procedures are analysing transactions made on weekends or holidays, large round numbers, common duplicate amounts, and unusual keywords. We also analyse large data sets by cross-referencing employee details against vendor details for concealed theft of assets between related parties. In the same data set, vendors with P.O. boxes are closely inspected, which is a popular method for concealing the perpetrator’s real location. In addition, we can verify employee details to identify “ghost employees.” In this procedure, we look for fictitious employees or other individuals receiving paychecks who are not actual employees.

Interviewing key individuals is also a critical component of a forensic investigation. Key individuals generally include the suspected perpetrator, the suspected perpetrator’s supervisor, peers, and any other employees with whom the suspected perpetrator had a close working and/or personal relationship. They also include other employees with the authority to sign checks, approve invoices, transfer funds, hire employees, approve pay increases, etc.

Interviewing can reveal a wide range of facts about the suspected fraud and provide insight into a larger scheme that was not questioned before. Additionally, interviews provide us with crucial qualitative information, such as the suspected perpetrator’s expensive hobbies or other red flags in committing fraud, including financial trouble or other personal pressure such as family issues or substance abuse.

“There are many key traits to be a great forensic accountant and an adviser, but it really comes down to two key traits: a drive to solve problems and clear communication with the attorneys and clients.”

Overall, a forensic investigation is a dynamic and iterative process. We employ a wide array of tools to provide answers for our clients; however, it is always crucial to adapt and pivot as necessary with the discovery of new information and data.

For engagements involving litigation support, we assist attorneys and clients in evaluating and untangling complex matters with our expertise. Our services may include analysing and calculating economic damages, assisting with discovery review, reviewing documents and financial data, determining appropriate damages methodologies, quantifying damages, preparing expert reports, providing expert witness testimony, and reviewing opposing experts’ opinions.

In these engagements, we may assist in producing an expert report for a trial or arbitration. An expert report generally includes our expert interpretation of the matter and a dollar amount of economic damages that our client may be owed. Calculating economic damages may involve analytical procedures, interviews, document review, and accounting data review similar to forensic investigations. Additionally, litigation support engagements may involve a significant portion of research and input on specific industry trends and projections. Once we have concluded our opinion for the court, we also assist attorneys and clients by attending depositions and providing expert witness testimony. We also assist by reviewing the opposing expert’s reports and attending their depositions. Overall, we work closely with attorneys and clients throughout all stages of the dispute.

What are the key traits a great forensic accountant and an adviser need to possess?

There are many key traits to be a great forensic accountant and an adviser, but it really comes down to two key traits: a drive to solve problems and clear communication with the attorneys and clients.

As forensic accountants, we are engaged to solve problems and provide clarity on issues that may be overwhelming for the client’s scope. In contrast to other areas of accounting, such as audit services, disputes we are engaged to resolve are often unique. For this reason, having a great drive to solve problems is one of the essential traits in this field.

Furthermore, we must be able to clearly and effectively communicate to those that we serve. Our investigation and litigation support become meaningful only when our work can be properly articulated to those who may not be experts in the field. This includes verbal communication throughout the process, writing skills to compose expert reports, and experience to navigate the challenges of one of the loneliest places on earth, the witness stand.

What is your favourite part about your job?

My favourite part about my job is that our work is rarely dull. We get to analyse and gain insights into all types of industries and diverse companies and individuals and we get to solve real problems. Whether it is a forensic investigation or expert witness assignment, our work provides tangible value by providing our clients with the bottom line. We bring real solutions to complex business problems.

For more information, visit: www.ghjadvisors.com 

The Financial Market Supervisory Authority (FINMA), Switzerland’s financial watchdog, announced on Wednesday that it had opened enforcement proceedings against Credit Suisse over a spying scandal that came to light in 2019.

In a statement, FINMA said that it would “pursue indications of violations of supervisory law in the context of the bank’s observation and security activities and in particular the question of how these activities were documented and controlled,” adding that such proceedings “can be expected to take several months.”

Credit Suisse announced that it would cooperate with the investigation “to ensure a complete and expeditious conclusion of the review of this episode and incorporate lessons learned.”

FINMA’s announcement follows the completion of a review of the bank’s corporate governance and its surveillance of former employees. The employees targeted were former head of wealth management Iqbal Khan, who was leaving for a post in Suisse Credit rival UBS, and former head of human resources Peter Goerke.

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Credit Suisse CEO Tidjane Thiam resigned in February amid the investigations, maintaining that he was not aware of the spying operation. An internal probe by the company concluded that COO Pierre-Olivier Bouee bore responsibility, leading to Bouee’s termination.

Thiam has since been replaced as CEO by banking veteran Thomas Gottstein.

For our May edition, Finance Monthly has the pleasure to connect with Salvatore LaScala. With over 20 years of  hands-on  experience  to  conduct investigations  and  compliance  reviews  on  behalf  of  financial  institution  clients  responding  to regulatory or law enforcement matters concerning anti-money laundering, Bank Secrecy Act, USA PATRIOT Act and Office of Foreign Assets Control, he now co-leads Navigant Consulting’s Global Investigations and Anti-Money Laundering Practice in New York. His company serves financial institutions of all kinds by providing assistance with responding to Regulatory Actions in addition to more proactive services. This work includes AML/Sanction Program compliance projects such as including Look-backs, CDD remediations, Monitorships, Investigations, Risk Assessments, Compliance Gap Analyses, Model Validations, NYSDFS Part 504 work and AML/Sanctions Compliance technology enhancement, implementation and optimization. Navigant also provides investigators to clear FIU surge activity, outsourced FIU services, and embedded compliance officers.

 

In your opinion, how robust is the current anti money laundering (AML) regulation?

It is appropriately robust and evolving in a manner consistent with changes in banking, securities and payment systems.

 

Typically how do financial institutions manage their money laundering compliance obligations? How can they remain up-to-date and compliant?

Financial institutions face numerous compliance challenges from different areas, including AML and Sanctions. Considering the complexity of these regulations, the rigor of examination and competitive business landscape, these financial institutions typically do very well. We are, however, more frequently reminded of examinations that result in an action, whereas successful exams get no mention. Good risk assessments, independent reviews and Governance, in particular, accountability, oversight and training, go a long way towards keeping AML and Sanction programs up-to-date.

 

Tell us a bit about your work in the field.

I lead large teams that regularly perform historical transaction reviews (Lookbacks) and KYC/CDD/EDD file remediation work. I also help clients overcome AML and OFAC backlogs by deploying teams embedded at our clients’ work sites to that disposition alerts.

My expertise includes assisting clients with the selection, implementation, optimisation and validation of AML and OFAC compliance technology and enhancing AML transaction monitoring detection scenarios and sanctions filter interdiction logic.

My work is exciting. I am able to market our great services to client, deliver those services, lead teams of highly talented people and enjoy the satisfaction of jobs well done. Moreover, as someone who needs to constantly learn and evolve, the introduction of Artificial Intelligence, Machine Learning and Robotics Process Automation lets us provide more effective compliance and investigative solutions than ever before.

 

Contact details:

Email: salvatore.lascala@navigant.com

Phone: +1 212.554.2611

Website: https://www.navigant.com

Next up, we hear from Jeffrey Davidson, the Managing Director of Honeycomb Forensic Accounting, who has over 20 years’ experience in working on complex business disputes, with particular focus on the accounting, financial, economic and commercial components. Jeffrey specialises in forensic investigations, litigation support, contentious valuations and dispute resolution, covering civil, criminal and regulatory cases, and here he tells us about trends in the forensic accounting sector.

 

In your opinion, what types of skills, both accounting and non-accounting, are needed to be a successful thought leader in the forensic accounting sector?

 Thought leadership in forensic accounting is all about responsiveness to client needs. It is about being able to quickly and effectively identify the structural and technical requirements needed to find a solution for the client. Once that solution is found, it must be delivered and presented swiftly and purposefully. It is about attention to detail, without losing sight of the bigger picture within which the role sits, and what the added value of the project is.

 

How does modern technology present a challenge to uncovering vital information relating to an investigation? How do you overcome this challenge?

Modern technology is a challenge, but it also represents an opportunity and an enabling tool. The purpose of technology is to complement and enhance human intellectual skills and judgement. It comes into its own in giving access to information, particularly in terms of capturing electronic data, and then in enabling very large amounts of data to be reviewed, sifted, searched and analysed. Big data technology tools allow specific references, anomalies and oddities in large data sets, whether verbal, numerical, or even pictorial, to be identified in a fraction of the time and at a fraction of the cost of using humans. This then allows the humans to concentrate on a small data set, most likely to produce results, and which justify the application of human thinking.

 

How can companies mitigate the risk for economic crime and fraud?

The keys to this are the triple factors of unpredictability, curiosity, and constant review. Fraud and economic crime flourish in an environment of complacency and repetition, where it becomes easy for fraudsters to work around the patterns of control and review. Systems of control are only effective when the fraudster cannot predict what part of the system and which procedures an auditor or forensic investigator will next review, or when and how system changes will be made. The success and longevity of nearly every fraud we have investigated has at least been contributed to by the lack of critical review by those entrusted with the task of keeping a business safe from both internal and external threat. The advice we give the client as part of providing ongoing protection always involves suggestions how to keep ahead of potential fraudsters (and hopefully encourage them not to start!) with ongoing unpredictable review patterns.

 

What are the most common hurdles that Honeycomb is faced with when assisting with forensic accounting disputes and investigations? 

Honeycomb is a very experienced and well-resourced forensics provider, but like any other business, it has to manage resources and make sure it has a well-conducted approach to meeting clients’ needs. Forensics is also a fast moving environment, not only in technological terms. We need to ensure we have the latest technical and electronic tools at hand to complement our human resources, which also require constant training in technical and other areas. Managing the forensic part of the dispute resolution process can also prove a challenge, managing the differing demands of clients and their legal teams, while at the same time engaging productively with opposite numbers.

 

What differentiates Honeycomb from its competitors?

Honeycomb can deploy teams as large and effective as most large accounting and consulting firms, but it does so as a wholly specialised and dedicated practice committed to client service. This means that all staff are trained and qualified forensic accountants and investigators. The work is partner-led and our goal is added value to the decision making and problem solving our clients require. As a boutique firm, we have no conflicts of interest so that clients can be assured that we have their interests in mind at all times.

 

Could you tell us a bit about Honeycomb International?

Honeycomb, although based in London, has instructed on many cases which are international in scope. Boutique forensic investigation firms, however entrepreneurial and agile, will be able to compete more effectively on this international stage when part of a worldwidenetwork. That’s why we have established Honeycomb International, an international network of independent, boutique and entrepreneurial forensic accounting and investigations firms.

At Honeycomb, we believe that cross-border cooperation of this nature is mutually beneficial, improving each firm’s profile, reach and agility, and expanding the scope of our capabilities. Member firms are better able to compete for work in their own territory, and will be able to collaborate and promote themselves jointly on cases originating in one country but involving work in others. Member firms also have access to trained staff where there is a need to bulk up teams on larger cases and are able to second staff to other member firms across the network to gain international experience

 

Contact Details:

www.honeycombpsg.com

jeffrey.davidson@honeycombpsg.com

+44 (0)20 3709 9250

 

 

Óscar Hernández has spent the last 11 years working in the Forensic department of Deloitte. His current position is Director, with a primary focus on financial fraud investigations and the preparation of expert witness reports, as well as the defence of the expert report in the Court (during the judgement).Here, Óscar talks to Finance Monthly about financial crime in Spain, recent changes to the criminal justice system and offers advice for companies on how they can protect themselves from fraud.

 

Financial crime is becoming more and more prevalent - what legal remedies are available to businesses that fall victim to financial crime, especially fraud?

In Spain both the legislation and the sensitivity of companies, especially some financial institutions, despite the improvements, are still very far from those in other neighboring countries, such as the United Kingdom, Germany or Switzerland. There is still no developed fraud prevention culture in Spain, which is why companies tend to act only reactively. In order for the damage suffered to be mitigated as far as possible, from the instant the fraud is identified, the company must put itself in the hands of its legal advisors. From a forensic point of view, it is essential to preserve the evidence of the possible crime in order to face possible legal proceedings that could be initiated and aimi to mitigate as much of the economic damage suffered by the company as possible.

 

How has the criminal justice system changed in recent years to combat the increased sophistication of fraud? What have been the significant changes?

The Criminal Code has been modified in recent years in order to provide judges and prosecutors with more powerful tools for the fight against corporate fraud and organized crime. Among other reforms, the assignment of criminal liability for legal persons, modified penalties for fraud and revised punishment for corruption in business (payment of bribes to politicians and officials) stand out. Although there is a social environment that is very sensitive to the many cases of political corruption that affect many institutions, there still exists some tolerance and permissiveness in relation to the submerged economy. These newly introduced reforms are on the right track, but still not enough.

 

What are the trends in Spain, in terms of the types of financial crimes that are being committed? What factors drive crime in certain sectors, for example the financial sector?

The most relevant fraud cases in Spain are closely related to political corruption. This corruption is intimately linked to corporate corruption and bribery, with the ultimate goal of achieving public work awards circumventing the legal awarding procedures based on quality and price. With regards to the financial sector, since the beginning of the financial crisis almost ten years ago, there have been a number of financial scandals related to the management of Savings Banks. Many of those entities have disappeared as a result of the crisis itself, but also due to ruinous investments made by the former management, payment of millionaire pensions and unjustified expenses.

 

What precautionary measures can companies take to protect themselves against fraud?

The reform of the Criminal Code and the attribution of criminal responsibility to legal persons have led to greater awareness of the companies’ Boards of Directors against financial crime. A greater development of proactive fraud prevention policies is being noted, especially in large companies, with the proliferation of Ethical Codes, Whistleblower channels and action protocols for fraud situations.

 

What are the complexities and challenges of investigating accounting irregularities?

Most of the fraud investigations related to accounting manipulation in Spain are mainly aimed at the upward manipulation of revenues, with different objectives such as achieving budgeted results or EBITDA, that are linked to the variable compensation of the Management, the makeup of the results for the possible sale of the company, etc. The investigation of these irregularities is very thorough and is based, most of the times, on the use of technological tools focused on communications review and data analytics.

 

What are the specific challenges that you are typically faced with when working on financial crime cases?

In recent years, fraud investigations have become increasingly complex. The fraudsters are getting more and more “professional”, which on many occasions forces us to adapt the investigation strategy on the fly and introduce even more technology in the investigations. It is becoming more necessary to have an open-minded attitude in order to be able to put ourselves in the fraudster’s shoes.

 

 

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